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: 29-12-2016 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.
Financial Attest Audit Report on the Accounts of Economic Revitalization of Khyber Pakhtunkhwa & FATA World Bank/MDTF Grant No. TF 099175 PK Planning & Development Department, FATA Financial Year 2015-16 Auditor General of Pakistan Islamabad
TABLE OF CONTENTS ABBREVIATIONS AND ACRONYMS...... PREFACE....... PART-I... PROJECT OVERVIEW...... 2 AUDITOR'S REPORT TO THE MANAGEMENT... 3 FINANCIAL STATEMENTS...... 4... 4 PART-Il... COVER LETTER TO THE MANAGEMENT LETTER......... 6 EXECUTIVE SUMMARY...... 8 MANAGEMENT LETTER....... 9... I. INTRODUCTION...... O...10 2. AUDIT OBJECTIVES...... 10 3. AUDIT SCOPE AND METHODOLOGY..... 10 4. AUDIT FINDINGS AND RECOMMENDATIONS...... 12 4.1 ORGANIZATION AND MANAGEMENT.......... 12 4.2 FINANCIAL MANAGEMENT...... 15 4.2 SUSTAINABILITY... 22 4.3 OVERALL ASSESSMENT... 5. CONCLUSION............. 2... ACKNOWLEDGEMENT... 24...
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
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 099175 PK for the financial year 2015-16 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. 2016 for the financial year 2015-16 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 099175 PK. Dated: 2. 12.2016 Place: Islamabad (MUHAMMAD AJMAL GONDAL) DIRECTOR GENERAL 11
PART-I 1. PROJECT OVERVIEW 2. AUDITOR'S REPORT TO THE MANAGEMENT 3. FINANCIAL STATEMENTS
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 099175 PK Date of Commencement: July. 2011 Date of Completion: ccenber, 201 6 (as per PC-I): PC-1 Cost: Rs.889.730 million Original Closing Date: June, 2015 Revised Closing Date: December, 2016 2
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, 2016. 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. 2016 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.12.2016
ECONOMIC REVITALIZATION OF KHYBER PAKHTUNKHWA AND FATA FINANCIAL STATEMENTS 4
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 2015-16 2014-15 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 9,006,815-211,522,552 PAYMENTS DURING THE YEAR Grants 06 23,528,819-163.153,225 Investment Promotion 07 1,500,000 6.480,953 Capacity Building 08 26,987,172 32,549,821 Incremental Operating Costs 09 24,422,639-20,992,744 TOTAL PAYMENTS 76,438,630-223,176,743 Increase /(Decrease) in Cash (67,431,815) - 11,654,191 Cash at Beginning of Year 108,387,311-120,041,502 Cash at End of Year 10 40,955,496-108,387,311 - 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
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 2015-16 2014-15 Budgeted Actual Amount Budget Amount Amctual Amount Amount Actual Amount Pak Rupees RECEIPTS MDTF - World Bank 05 9,006, 9,006,815 11,522,552 211,522,552 TOTAL RECEIPTS 9,006,815 9,006,815 211,522,552 211,522,552 PAYMENTS DURING THE YEAR Grants 06 45,810,557 23,528,819 248,576,225 163,153,225 investment Promotion 07 21,800,000 1,500,000 27,025,000 6,480,953 Capacity Building 08 111,564,768 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 76,438,630 344,791,944 223,176,743 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
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 099175 PK. The project became effective from July 2011 with sie, closing date of une 30, 2015 and subsequently extended upto December31, 2016. 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
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. 2015-16 2014-15 Is S Pak Rupees US S Pak Rupees SOE Procedures 5,1 84,509 9,006815 2,066,316 211,522,552 86.509 9,0xi6.815 2,06636 211,522,552 5l This represents funds transferred to the ERKF Projects Designated US Dollar Bank Account bearing number A- B2 (22534-7) 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 2015-16 2014-15 Amounts in US S Closing Bailnce 47,716 134,225 47,726 134,225 6 Grants Note 2015-16 2014-1 Amnants in Pak Rupees Rebabiltation Grants 22,528.819 161 210,850 1Jp-gradation Grants 1,000,000 1,500,000 Busness Development Support Grants - 442375 2328,81913,25 7 Investment Mobilization Note 2015-16 2014-15 Amounts in Pak Rupees Recornnet Pakislan -82,000 Pr-feasibihtyofDiaspta Bond - 4.425,13 Investment Rood Show( Intemationel) - 123,850 ivestmett Road Show (National) 1050,000 E valuation ofipre-feasibility study of I1 1.500,00 1500,000 6,480,953 8 CapacityBuilding Note 2015-16 2014-15 Amounts in Pak Rupees Capacity Building of Counterpart Institutions 2,219,560 13,417,986 Public Private Dialogue 15,535,612 10,382.977 1istirationalizung Investment Promotion 9.232,000 8,748.858 26,987,172 32,549,821
9 Increnental Operating Cnis Note 2015-16 2014-15 Amounts in Pak Rupees Remuneration and Salailes 9 I 16241,400 15,201,000 Office luipinent 600.664 [%6,978 Conngenm ixpenditure 7,5890,575 5,594,766 9.1 Remruneration ond Salaries 24,422,639 204992744 2015-16 2014-15 Amotnts in Pak Rupees Reuneration- Specialists/4ndividual Consultants 14e400,000 13,200,000 Salaries- Staf 1,84 1,400 2001000 16,241,400 15,201,000 10 Cash And Banmk AnouLntg in Prk Rupees Cash at Bank 4r955,496 108,387,311 l I Authorization for lfrue These financial statenents have been authorized for issue by the Projet Direetor Dn 20.09.2016 12 General Figures have been rounded off to the nearest rupee Audit fficer Project Direetor Project Director (ERKF) FATA Secretariat Peshawar ----Ia 9 ut.