1 Office of the Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Special Sectors Audit Wing Constitution Avenue Islamabad No.PA/FAP/FG/SSA/F-13/ 1 Dated: To, 1. The Secretary, Economic Affairs Division, Government of Pakistan Pak Secretariat, Block "C", Islamabad Subject: 2. /The Country Director, V World Bank Resident Mission, 20-A, Shahrah-e-Jamhuriat Sector G-5/1, Islamabad FOREIGN AIDED PROJECTS (fapsl-audit REPORTS Financial Attest Audits of the following FAP Audit Reports has been conducted by this office: S.No Name of Projects Development i Partners 1 Governance Support Project-FATA MDTF 2. Institutional Capacity Building Ombudsman IDA 3. Tertiary Education Support Project IDA 4. Second Gen lct Sec Policy & Legal World Bank 5. Social Safety Net Project IDA 6. Social Safety Net T/A IDA 7. Emergency Recovery Project TDPs of FATA IDA 8. Water Sector Capacity Building Indus-21 IDA 9. Economic Revitalization of KPK and FATA World Bank 2. Certificate/Financial Attest alongwith the Audit Report containing therein the management letter (ML) on the same is attached herewith. The referred is hereby issued simultaneously to the Government (EAD) and to the World Bank Resident Mission Islamabad through EAD.
2 Financial Attest Audit Report on the Accounts of Economic Revitalization of Khyber Pakhtunkhwa & FATA World Bank/MDTF Grant No. TF PK Planning & Development Department, FATA Financial Year Auditor General of Pakistan Islamabad
3 TABLE OF CONTENTS ABBREVIATIONS AND ACRONYMS PREFACE PART-I... PROJECT OVERVIEW AUDITOR'S REPORT TO THE MANAGEMENT... 3 FINANCIAL STATEMENTS PART-Il... COVER LETTER TO THE MANAGEMENT LETTER EXECUTIVE SUMMARY MANAGEMENT LETTER I. INTRODUCTION O AUDIT OBJECTIVES AUDIT SCOPE AND METHODOLOGY AUDIT FINDINGS AND RECOMMENDATIONS ORGANIZATION AND MANAGEMENT FINANCIAL MANAGEMENT SUSTAINABILITY OVERALL ASSESSMENT CONCLUSION ACKNOWLEDGEMENT
4 Abbreviations and Acronyms -MD)TF DRC ECNEC ERKF FATA FDWP Document Review Committee Executive Committee of the National Economic Council Econonic Revitalization of Khyber Pakhtunkhwa and FATA Federally Administered Tribal Areas FATA Development Working Party F A \ FATA Investment Facilitation Authority GIS GRMC GOP IPSAS ISSAI KPK NOL PCNA PMIU PU SME SMIA Geographical Information System Grant Review and Monitoring Committee Government of Pakistan International Public Sector Accounting Standards International Standards Of Supreme Audit Institutions Khyber Pakhtunkhwa Multi Donor Trust Fund No Objection Ltter Post Crises Need Asessment Project Management Unit Project Unit Small and Medium Enterprises Strall and Medium Enterprises Development Authority
5 PREFACE The Auditor-General conducts audit subject to Articles 169 and 170 of the Constitution of the Islamic Republic of Pakistan, 1973 read with Sections 8 and 12 of the Auditor-General's (Functions, Powers and Terms and Conditions of Service) Ordinance, 2001L The audit of Economic Revitalization of Khyber Pakhitunkhwa and FATA under Planning and Development Department FATA Grant No. 'F PK for the financial year funded by the Multi Donor Trust Fund through World Bank was carried out accordingly. The Directorate General Audit (Federal Government), Islamabad conducted audit of the JEconomic Revitalization of Klivber Pakhtunkhwa and FATA (ERKF)" pr ject in December for the financial year with a view to reporting significant findings to stakeholders. Audit examined the economy. efficiency, and effectiveness aspects of the ERKF project. in addition, audit also assessed. on test check basis, whether the management complied with applicable laws, and rules and rcgulations in managing the ERKF project. The Audit Report indicates specific actions that, if taken, will help the management realize the objectives of the ERKF project. The Report consists of two parts. Part-I contains Auditor's Report (Audit Opinion) and Financial Statements. Part-i contains Executive Summary. Management Letter and Audit Findings. The Report has been prepared for submission to the International Development Association (1)A) in terms of Grant Agreement No. TF PK. Dated: Place: Islamabad (MUHAMMAD AJMAL GONDAL) DIRECTOR GENERAL 11
6 PART-I 1. PROJECT OVERVIEW 2. AUDITOR'S REPORT TO THE MANAGEMENT 3. FINANCIAL STATEMENTS
7 PROJECT OVERVIEW 4uane of Project: Sponsoring Authority: Executing Authority: Grant No: Economic Rtitalization of Khyber Pakhtunkhwa and FATA FATIA Secretariat through Federal Government PMU-ERKF-FATA/SMEDA TF PK Date of Commencement: July Date of Completion: ccenber, (as per PC-I): PC-1 Cost: Rs million Original Closing Date: June, 2015 Revised Closing Date: December,
8 Mr. Muhammad Imran Project Director, Economic Revitalization of KP & FATA. 2nd Vloor. /ui Apartments, Warsak Road. Peshawar. Auditor's Report on the "Economic Revitalization of Khyber Pakhtunkhwa and FATA" Financial Statements We have audited the accompanying financial statements of the Economic Revitalization of Khber Pakhtunkhwa and FATA Project under the Planning and Development Department, FATA Grant No. TF 0)9175 PK that comprises Statement of Receipts and Payments together with the Notes forming part thereof for the year ended 30 " Jine, Management Responsibility It is the responsibility of the project management to establish and maintain a system of internal controls, and prepare and present the Statement of Receipts and Payments in conformity with the requirements of Cash Basis IPSAS Financial Reporting tinder the Cash Basis of Accounting Standard. Auditor's Responsibility The responsibility of the auditor is to express an opinion on the financial statements based on the audit conducted. We conducted our audit in accordance with the International Standards of Supreme Audit Institutions. These standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free of material misstatements. The audit process includes examining, on a test basis. evidence supporting the amouts and disclosures in the financial statements. It also includes assessing the accounting principles used and significant estimates made by the management, as \well as evaluating the mverall statement presentation. We beliew that our audit provides a reasonable basis for our opinion. Opinion In our opinion: a) The financial statements present fairly, in all material respects. the cash receipts and pa ments by the project for the year ended 30"' June in accordance with Cash Basis IPSAS Financial Reporting under the Cash Basis of Accounting Standard. b) The expenditures have been incurred in accordance with the requirements of legal agreem 'nts. (MIHAN4A AJ ALGONDAL) Director General Directorate General Audit (Federal Government), Bencolent lund Building, Zero Point, Islamabad Dated:2%g
9 ECONOMIC REVITALIZATION OF KHYBER PAKHTUNKHWA AND FATA FINANCIAL STATEMENTS 4
10 PROJECT MANAGEMENT UNIT ECONOMIC REVITLAIZATION OF KIIYBER PAKIlTUNKHWA AND FATA (FATA SHARE) STATEMENT OF CASH RECEIPTS AND PAYMENTS FOR THE YEAR ENDED JUNE 30,2016 Note Receipts(Payments) Payment by Third Reccipts(Payments) Payment by Third Controlled by Project Parties Controlled by Project Parties Pak Rupees RECEIPTS MDTF-World Bank 05 9,00-211,522,552 - TOTAL RECEIPTS 9,006, ,522,552 PAYMENTS DURING THE YEAR Grants 06 23,528, ,225 Investment Promotion 07 1,500, ,953 Capacity Building 08 26,987,172 32,549,821 Incremental Operating Costs 09 24,422,639-20,992,744 TOTAL PAYMENTS 76,438, ,176,743 Increase /(Decrease) in Cash (67,431,815) - 11,654,191 Cash at Beginning of Year 108,387, ,041,502 Cash at End of Year 10 40,955, ,387,311 - The accompanying notes form an intergral part of these financial statements and are to be read therewith. Au Ofi Stlesa3t Proect Director V lproject Director (ERKF) FATA Secretanat Peshawar
11 PROJECT MANAGEMENT UNIT ECONOMIC REVITLAIZATION OF KHYBER PAKHTUNKHWA AND FATA (FATA SHARE) STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS FOR THE YEAR ENDED JUNE 30,2016 Note Budgeted Actual Amount Budget Amount Amctual Amount Amount Actual Amount Pak Rupees RECEIPTS MDTF - World Bank 05 9,006, 9,006,815 11,522, ,522,552 TOTAL RECEIPTS 9,006,815 9,006, ,522, ,522,552 PAYMENTS DURING THE YEAR Grants 06 45,810,557 23,528, ,576, ,153,225 investment Promotion 07 21,800,000 1,500,000 27,025,000 6,480,953 Capacity Building ,564,768 26,987,172 49,818,869 32,549,821 Incremental Operating Costs 09 33,030,374 24,422,639 19,371,850 20,992,744 TOTAL PAYMENTS 212,205,699 76,438, ,791, ,176,743 The accompanying notes form an intergral part of these financial statements and are to be read therewith. A Officer Project Director AUD )T O-FF1CER r Xe Audit Project Director (ERKF).t FATA Secretariat ;t(aiv.e Peshowar-Pswa
12 PROJECT MANAGEMENT UNIT ECONOMIC REVITLAlZATION OF KIIYBER PAK1HTUNKIIWA AND FATA (FATA SHARE) NOTES TO THE FINANCIAL STATEMENTS FOR TIE YEAR ENDED JUNE 30,2016 I ENTITY AND ITS LEGAL STATUS The financial statements are for Economic Revitalization of KP & FATA (URVf) - FATA Share project The Project has been conceived as an emergency response program under MDTF assistance for economic revival in Khyber Pakhrunikhwa and Federally Administered Tribal Areas (FATA) severely affected by mtilitancy and devastating floods / unprecedented floods / lorrential rains daring 2010, playing havoc across the area with the businesses and livelihood acivities. Tie Project is implemented under overall supervision of FATA Secretariat and PMU has been housed at Directorate of Projects (DoP) FATA Sceretariat Warsak Road Peshawar- Financing A grant of UJS) 2000 million was approved by MDTF. out of which FATA Shsre cosres to USD 6.6 million, The Project related agreements were signed on October II, 2011 bearing Grant TF PK. The project became effective from July 2011 with sie, closing date of une 30, 2015 and subsequently extended upto December31, Responsible Agency A primary responsibility for overall progress and management of financing has been entrusted to FATA Secretariat. Certificalion by Project Management on Application of Funds The management of Economic Revitalization of KP & FATA (ERKF) project certifies that the funds have been appliedlexpenditure have been incurred for the purposes intended in the financing agreement. 3 Accounting Convention and Statement of Compliance These Financial Statements have been prepared in accordance with Cash Basis International Public Sector Accounting Standards (IPSAS). Financial Reporting ttnder the Cash Basis of Accounting standard. The accounting policies have been applied consistently throughout the period. 4 Significant Accounting Policies 4.t Reporting Currency All amounts in the financial statements are in Pak Rupees. 412 Reveue Recognition Revenue is recignized on the date of receipt of money bylbank or clearance o'cheque. Revenue is recognized on gross basis and any related costs are recorded separately 43 Recogniiion of Expenditure Expenditure is recognized on the date when payment is made or cheque is issued. Fimancial year to which the paymnems pertain is determined by the date on whicih a cheque or payment advice is issued. 4.4 Foreign Currency Transactions Cash receipts and payments arising from transactions in foreign currencies arc recorded in Pak Rupee by applying the to gn currency amount, the exchange rate between the Pak Rupee and the Foreign Currency at Ore date of the receipts a lits, Exchange differences arising on settlement of these transactions are recognized in the Statement of Receipts and payments, Audit Officer AUDIT OFFICER Dilectorate Audit Feder Govt. Sub Q t P-shawat. Project Director Project Director (ER KF) FATA Secretanat
13 5 External Assistanre PROJECT MANAGEMENT UNIT ECONOMIC REVITLAIZATION OF KIHYBER PAKHTUNKHWA AND FATA (FATA SHARE) NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30,2016 External assistance was received in the form of Credit from the World Bank under financing ageemnent dated October 11, 2011 between the World Batik and Government of Pakittait (OP) for the purpose of the Economic Revttalzation of KP & FATA (ERKF) Project The following amounts were received by the Protject during the period Is S Pak Rupees US S Pak Rupees SOE Procedures 5,1 84,509 9, ,066, ,522, ,0xi , ,522,552 5l This represents funds transferred to the ERKF Projects Designated US Dollar Bank Account bearing number A- B2 ( ) by the World Bank Ott the basis of Withdrawal Applications submitted by the Project 5.2 lhcre has bet io instance of non compliance with the terms and conditions of the financing agreerrient between the World Bank and GoP which have resulted in "iancellation of Credit 5.3 Undrawn External Assistnee Undrawn Credit represent amounts specified in the financing agreement between the World Bank and GOP that the World Bank will disburse for ERKF project purposes. Note Amounts in US S Closing Bailnce 47, ,225 47, ,225 6 Grants Note Amnants in Pak Rupees Rebabiltation Grants 22, ,850 1Jp-gradation Grants 1,000,000 1,500,000 Busness Development Support Grants ,81913,25 7 Investment Mobilization Note Amounts in Pak Rupees Recornnet Pakislan -82,000 Pr-feasibihtyofDiaspta Bond ,13 Investment Rood Show( Intemationel) - 123,850 ivestmett Road Show (National) 1050,000 E valuation ofipre-feasibility study of I , ,000 6,480,953 8 CapacityBuilding Note Amounts in Pak Rupees Capacity Building of Counterpart Institutions 2,219,560 13,417,986 Public Private Dialogue 15,535,612 10, istirationalizung Investment Promotion 9.232,000 8, ,987,172 32,549,821
14 9 Increnental Operating Cnis Note Amounts in Pak Rupees Remuneration and Salailes 9 I 16241,400 15,201,000 Office luipinent [%6,978 Conngenm ixpenditure 7,5890,575 5,594, Remruneration ond Salaries 24,422, Amotnts in Pak Rupees Reuneration- Specialists/4ndividual Consultants 14e400,000 13,200,000 Salaries- Staf 1,84 1, ,241,400 15,201, Cash And Banmk AnouLntg in Prk Rupees Cash at Bank 4r955, ,387,311 l I Authorization for lfrue These financial statenents have been authorized for issue by the Projet Direetor Dn General Figures have been rounded off to the nearest rupee Audit fficer Project Direetor Project Director (ERKF) FATA Secretariat Peshawar ----Ia 9 ut.