.. A FINANCIAL ATTEST AUDIT REPORT ON THE ACCOUNTS OF JOBS AND COMPETITIVENESS PROGRAM Loan No. 8600-PK WORLD BANK PLANNING AND DEVELOPMENT DEPARTMENT, GOVERNMENT OF THE PUNJAB For The Financial Year 2016-17 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Auditor General of Pakistan Islamabad
TABLE OF CONTENTS... "'... List of abbreviations Preface PART-I PART-II Project Overview Auditor's Report Financial Statements MANAGEMENT LETTER COVERING LETTER TO THE MANAGEMENT LETTER EXECUTIVE SUMMARY 1. Introduction 2. Audit Objectives 3. Audit Scope and Methodology 4. AUDIT FINDINGS AND RECOMMEND A TIO NS 4.1 Organization and Management 4.2 Financial Management 4.3 Procurement and Contracting 4.4 Overall Assessment 5. CONCLUSION ACKNOWLEDGEMENT Page No. 2 3 4 5 6 7 8 9 10 11 12 12 12 12-21 22 23 24 1
,.. AG DG ECNEC EPD GoPb IPSAS INTOSAI ICRU ISSAI J&C LO MTDF MoU PC-1 PAD PFR PLRA PRMP SDAC Abbreviations and Acronyms Accountant General Director General Executive Committee of the National Economic Council Environment Protection Department Government of the Punjab International Public sector Accounting Standards International Organization of Supreme Audit Institutions Investment Climate Reform Unit International Standards of Supreme Audit Institutions Jobs and Competitiveness Program Lahore (Cost Centres) Medium Term Development Framework Memorandum of Understanding Planning Commission Form no. I Project Appraisal Document Punjab Financial Rules Punjab Land Record Authority Punjab Resource Management Program Special Departmental Accounts Committee 2
PREFACE The Auditor General of Pakistan conducts audit, in terms of articles 169 and 170 of the Constitution of the Islamic Republic of Pakistan, 1973, read with Sections 7, 8 & 12 of the Auditor General's (Functions, Powers and Terms & Conditions of Service) Ordinance, 2001. This audit of Financial Statements of the Jobs and Competitiveness (J&C) Program financed by Government of the Punjab and the World Bank for the financial year 2016-17 was carried out according! y. The Directorate General Audit, Punjab Lahore conducted audit of the J&C during September, 2017 for the financial year 2016-17 with a view to report significant findings to stakeholders. Audit examined the economy, efficiency and effectiveness aspects of the J&C. In addition, audit also assessed, on test check basis, whether the management complied with applicable laws, rules and regulations in managing the entity. The audit report indicates specific actions that, if taken, will help the management realize the intended objectives. The report has been discussed with the J&C Management in September, 2017. The report consists of two parts i.e. Part-I contains Auditor's Report (Audit Opinion) and Financial Statements and Part-II consists of Executive Summary, Management Letter and Audit Findings. The report has been prepared for submission to the World Bank in terms of agreement. Dated: Place: Lahore. Director General Audit, Punjab, Lahore 3
PART-I 1- Project Overview 2- Auditor's Report to the Management 3- Financial Statements 4
PROJECT OVERVIEW Name of the Project Sponsoring Authority Executing Agency Loan No. Principal Loan Amount Date of Commencement Actual Date of Commencement: Date of Completion Jobs and Competitiveness Program World Bank Punjab Resource Management Program IBRD-86000 USD 100 million 31-03-2016 17-06-2016 30-06-2021 Grant Utilization Status: Amount utilized during 2016-17(Rs.) 2,574,017,771 5
AUDITOR'S REPORT Auditor's Report on J&C Financial Statements We have audited the accompanying Financial Statements of Jobs and Competitiveness Program that comprises of Statement of Recei ts and Payments, Statement of Comparison of Budget and Actual together with the notes forming part thereof for the year ended 3<P June, 2017. Management's Responsibility It is the responsibility of Project Management to establish and maintain a system of internal control, and prepare and present the Statement of Receipts and Payments in conformity with the requirements of Cash Basis IPSAS, Financial Reporting under 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 International Standards of Supreme Audit Institutions. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Financial Statements are free of material misstatements. The audit process includes, examining on a test basis, evidence supporting the amounts and disclosures in the Financial Statements. It also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall statement presentation. We believe 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 payments by the project for the year ended 30 1 h June, 2017 in accordance with IPSAS Cash Basis of Accounting Standard. (b) The expenditure has been incurred in accordance with the requirements of legal agreement. Matter of Emphasis It is emphasized that the recruitment process of J&C and its implementing agencies is not as per relevant rules and regulations and notable violations have been found during audit of selected implementing agencies which requires special attention of the management. Place: Lahore Dated: ~ (Fareed Mahmood Ch.) Director General Audit, Punjab, Lahore 6
FINANCIAL STATEMENTS FOR THE YEAR ENDED ON 3QthJUNE, 2017 7
Jobs and Competitiveness (J&C) Program IBRD Credit No. 86000 Statement of Cash Receipts and Payments For the Year Ended June 30, 2017 Note Amount in Pak Rupees 2016-2017 Receipts/ Payment Payments under Program Parties by Third Amount in Pak Rupees 2015-2016 Receipts/ Payment Payments under Program Parties by Third RECEIPTS Government of the Punjab External Asistance TOTAL RECEIPTS 5 6 / 6.1 2,574,017,771 2,574,017,771 IOI ID PAYMENTS Government of the Punjab Target Departments and IAs Board of Revenue Environment Protection Department LZ4841 LQ4077 2,935,000 3,714,787 Faisalabad Industrial Estates Management Company Industries, Commerce and Investment Department Investment Climate Reform Unit Lahore High Court Punjab Information Technology Board (Starting a Business) Cluster Development Initiative Punjab Small Industries Corporation (Grant in Aid) Punjab Small Industries Corporation (Gandhara Art Village) Punjab Small Industries Corporation L016000255 LQ4087 LZ4838 L016003213 LE4697 L017000030 LQ4224 L015002097 L015002097 28,005,000 6,978,000 15,564,015 17,937,000 2,328,865 52,545,523 1,394,723,000 52,272,000 270,324,000 Punjab Small Industries Corporation (Est of Metal Craft Artisan Village) L015002096 74,340,000 Punjab Small Industries Corporation (Est. of handicraft development center) Punjab Small Industries Corporation (Research and Publication of Books) L015002099 L015002103 7,890,000 4,175,999 Punjab Small Industries Corporation (Development of infrastructure Small Industries Estate) L013000016 47,957,000 Urban Unit L014000130 499,854,278 Punjab Resource Management Program L001001359 92,473,304 TOTAL PAYMENTS 2,574,017,771 Increase/ (Decrease) in Cash Cash at Beginning of Year Cash at End of Year * The accompanying notes form an integral part of these financial statements. ** Amounts mentioned above have been reported by respective IA and TD to PRMP through submission of Budget Reports for FY 2016-17 ***As per PAD, following LO codes have been added for development expenditure L015002097, L015002096, L015002099, L015002103, L013000016, L014000130 ~-=---- Financial Dl:f:f, Punjab Resource Management Program Management Specialist
Jobs and Competitiveness (J&C) Program IBRD Credit No. 86000 Statement of Budgeted and Actual Amount For the Year Ended June 30, 2017 Amount in Pak Rueees Amount in Pak Rueees 2016-17 Revised Estimates Revised Estimates Fund Centre 2016-171 Budgeted Actual Amount 2015-161 Budgeted Actual Amount Amount Amount 2015-1 6 RECEIPTS Government of the Punjab 2.983.992.~00 I 2,574,017,771 External Asistance TOTAL RECEIPTS 2,983,992,000 2,574,017,771 11 11 PAYMENTS Government of the Punjab Target Depts and IAs Punjab Land Records Authority LZ4841 89,769,000 2,935,000 Environment Protection Department LQ4077 50,000,000 3,714,787 Faisalabad Industrial Estates Management L016000255 50,000,000 28,005,000 Company Industries, Commerce and Investment LQ4087 13,000,000 6,978,000 Department Investment Climate Reform Unit LZ4838 30,000,000 15,564,015 Lahore High Court L016003213 144,077,000 17,937,000 Punjab Information Technology Board (Starting a Business) LE4697 7,490,000 2,328,865 Cluster Development Initiative L017000030 133,245,000 52,545,523 Punjab Small Industries Corporation (Grant in Aid) Punjab Small Industries Corporation (Gandhara Art Village) LQ4224 1,394,723,000 1,394,723,000 L015002097 52,272,000 52,272,000 Punjab Small Industries Corporation L015002096 270,324,000 270,324,000 Punjab Small Industries Corporation (Est of Metal Craft Artisan Village) Punjab Small Industries Corporation (Est. of handicraft development center) L015002099 74,334,000 74,340,000 L015002103 16,446,000 7,890,000 Punjab Small Industries Corporation (Research and Publication of Books) L013000016 10,355,000 4,175,999 Punjab Small Industries Corporation (Development of infrastructure Small Industries L014000130 47,957,000 47,957,000 Estate) Urban Unit L016001442 500,000,000 499,854,278 Punjab Resource Management Program L001001359 100,000,000 92,473,304 TOTAL PAYMENTS 2,983,992,000 2,574,017,771 The accompanying notes form an integral part of these financial statements. Amounts mentioned above have been reported by respective IA and TD to PRMP through submission of Budget Execution Reports for FY 2016-17... As per PAD, following LO codes have been added for development expenditure L015002097, L015002096, L015002099, L015002103, L013000016, L014000130,Vvf~ Deputy Program Director Punjab Resource Management Program Audit Officer Directorate General Audit Financial Management Specialist Punjab Resource Management Program
Jobs and Competitiveness (J&C) Program IBRD Credit No. 86000 Notes to the Financial Statements For the Year Ended June 30, 2017 Program (J&C ) Description 1.1 Introduction The Financial Statements are for Jobs and Competitiveness (J&C) program. The financial statements encompasses the reporting entity as defined in the Financing Agreements between the Islamic Republic of Pakistan and the World Bank for the program. The Financing agreement of US$ 100 million (IBRD Credit No.86000-PK) was approved on 31st March 2016. 1.2 Program Objectives The J&C prog ram is designed to improve governance outcomes related to the business environment in the province and to improve investment outcomes related to infrastructure. PRMP is responsible for overall program coordination. The financing instrument used for this Program is Performance for Results (PforR), which is relatively new in Pakistan. PforR instrument supports government's existing programs and systems. 1.3 Program Scope The disbursement is linked with achievement of certain agreed results called Disbursement Linked Results (DLRs) and disbursement is made directly to Finance Department after submission of report validated by third party firm. There is no "Eligible Expenditure Program (EEP) in this instrument. However, an "Expenditure Framework (EF)" has been prepared which may be viewed in the Program Appraisal Document (PAD), wherein, some selective cost centers /ODO codes/expenditure themes (both from current and development side) of target departments and implementing agencies have been included on the basis of five year expenditure projections. Accountant General Punjab makes payments and maintain accounting records of cost centers/odo codes mentioned in EF using the government financial management information system/pifra System. 1.4 Estimated Cost The Program is planned over five years with disbursements up to a maximum of US$100 million eq uivalent) over this time. 1.5 Sources of Finance 1. World Bank 2. Government of the Punjab 1.6 Components of J&C Program The J&C program has been designed to improve the general governance environment related to doing business in the province of punjab. Additionally, the project aims to improve investment outcomes related to investment in infrastructure and align such investments to requirements as gathered from the Punjab Spatial Strategy. 2 Certification by Project Management on Application of Funds/ Management Assertion : Funds against IBRD Credit No. 86000-PK have been utilized for the project purposes as defined in the financing agreement. 3 Accounting Convention and Statement of Compliance The Financial Statements of J&C program have been prepared in accordance with Cash Basis International Public Sector Accounting Standards (IPSAS), Financial Reporting under the Cash Basis of Accounting. These financial statements have been prepared using cas h basis of accounting where transactions are only recog nized when cas h is received or paid. 4 Significant Accounting Policies : 4.1 Foreign Currency Transaction : Cash receipts and payments arising from transactions in foreign currency are recorded in Pak Rupees by applying the exchange rate prevailing at the date of transactions. 4.2 Reporting Currency : All amounts in the financial statements are in Pak Rupees. 4.3 Revenue Recognition : Revenue is recog nized on the date of receipt of money by bank or clearance of cheque. Reven ue is recognized on gross basis and any related costs are recorded separately 4.4 Recognition of Expenditure : Expenditure is recognized on the date when payment is made or cheque is issued. Financial year to which the payments pertain is determined by the date on which a cheque or payment advice is issued. 4.5 Basis of Presentation The financial statement has been prepared in accordance with International Public Sector Accounting Standard (IPSAS) cash basis. 4.6 Accounting Convention These financial statements have been prepared under the historical cost convention with cash basis of accounting. Accordingly, expenses are recognized when paid rather incurred. 4.7 Foreign Currency Transactions All transactions have been made in Pak. Rupees 4.8 Fixed Assets Fixed Assets are disclosed on Historical Cost Basis. Sched ule of Fixed Assets has been given. 5 Receipts - Government of the Punjab : This represents the funds provided by Government of the Punjab to pay for the program for the period July 01. 2016 to June 30, 2017 amou nting to PKR 2,983 Million 6 External Assistanc e :
6.1 No external assistance was disbursed directly to J&C agencies during the financial year. However, an amount of 20.26 USO million approximately was disbursed to Finance Department directly as budgetary support in FY 2016-17 as advance paymenvreimbursement for J&C Program. The amount however, can not be refiected against the external assistance column under PforR instrument and will be treated as separate amount irrespective of the program. Whereas, funding to all implementing agencies and target departments will be provided from GOPb funds as per government's rules and procedures. Funding Mechanism: The lending instrument under J&C Program is Performance for Results (PforR). PforR supports government's own systems and existing programs. As far as funding of the program is concerned, as mentioned in Program Appraisal Document (PAD), program funding will be included in the provincial annual budget following the regular budget cycle and all funding will fiow through distinct budget line items. Whereas, each Implementing Agency (IA) will maintain its own books of accounts for program related activities on cash basis, using the government's accounting policies and procedures. The figures mentioned in the financial statements have been reported by respective Implementing Agencies and Target Departments to PRMP through submission of quarterly budget execution reports for FY 2016-17 and through AG Office's PIFRA financial system clarified/duly reconciled with AG/Treasury Offices by respective IAs and TDs whereas, PRMP has compiled the same figures in form of financial statements for FY 2016-17. Implementing Agencies are Targeted Departments: There are a total of 15 implementing agencies and targeted departments. As provided in PAD, all implementing agencies and target departments are getting funding in their respective regular budget line from Finance Department in the agreed ODO codes/lqs as agreed in the Expenditure Framework both from development and current side. The Program funding to all!as and TDs comes from Government of Punjab only whereas World Bank releases the loan amount directly to Finance Department as budgetary support subject to achievement of agreed DLRs duly validated by third party firm. Since, in J&C, funds fiow directly from Finance Department through distinct budget lines to IAs and TDs each having their own Drawing and Disbursing Officers (DD0s) and Principal Accounting Officers (PAOs) legally authorized for accounting controls and audit observations as per government's policies and rules ; therefore, expenditures, payments, procurements and other associated activities are the responsibility of these respective entities. It is pertinent to mention here that under PforR instrument, World Bank does not provide any funding directly to implementing agencies or target departments and instead the Program is funded by Government of Punjab using its own sources, while on achievement of DLRs verified by third party, funds from the World Bank fiow to Finance Department as per disbursement framework. 6.2 There has been no instance of non compliance with the terms and conditions of the Financing Agreement between the World Bank and GoP which have resulted in cancellation of loan. 7 Authorization for Issue : These financial statements have been authorized for issuance by the management of J&C (PRMP). 8 General : Figures have been rounded off to the nearest rupee. 9 Payments: PMU/PRMP received funds from Government of the Punjab through assignment account which is lapsable. ~ ~ Directorate General Audit Deputy Program Director Punjab Resource Management Program ~~ Financial Management Specialist Punjab Resource Management Program
- Expenditure Statement F.Y 2016-17 Sr. Revised Consumption Description I No. Budget (30.06.2017) - f., Balance 1 Establishment cost 36,825,368 34,822,490 2,002,878 2 Honorarium & Internship 66,667 ( 66,667-3 Rent of Building 5,760,000 5,760,000-4 Furniture & Fixture 64,935 ~ 64,935-5 Machinery & Maintenance 2,213,521 2,177,771 35,750 6 Purchase of Vehicles 4,200,000 - '' - 4,200,000 POL Charges/ Maintenance of ' 7 vehicle 2,393,455 1,885,180 508,275 8 Office Automation 501,864 501,546 318 9 Stationary + Postage etc. 1,170,000 1,143,952 26,048 10 TA/DA 145,414,, ~t 137,114 8,300 11 Telephone Charges 432,569 412,604 19,965 12 Cost of Utilities 612,342. 610,725 1,617 13 Newspaper & Periodicals 103,027,. I; 98,950 4,077 14 Cost of Workshops 60,000 ;.,, 49,725 10,275 15 Rates & Taxes 65,750 25,620 40,130 16 Entertainment 158,351 ~ -;~~.i.',:.::. _;,;,'..', ~. ;, 105,714 52,637 17 Miscellaneous / Others 243,287!'... 184,891 58,396 18 Consultancies 44,812,350 44,273,386 538,964 19 Training/CB Programs 121,100 71,100 50,000 20 Printing and Publishing 50,000.. 26,277 23,723 - Total Cost 100,000,000 92,473,304 7,526,696,,
Reconciliation of Assignment Account {Local Currenc)l} {Assignment Account No.45 maintained in NBP Main Branch 1 Lahore} Description Pak Rs. Opening Balance on 01.07.2016 NIL Less: NIL Add: 150,000,000.00 Issued Cheques Cancelled NIL Direct Payments NIL - Surrendered During F.Y. 2016-17 (50,000,000.00) Total (Revised Allocation) 100,000,000.00 Expenditures for the year 2016-17 92.473,304.00 Balance as on 30.06.2017 7,526,696.00 Amount Lapsed on 30.06.2017 7,526,696.00 Closing Balance as per bank statement on 30.06.2017 NIL
Punjab Resource Management Program (PRMP) Grant No.22036 Financial Statements For the Year Ended June 30, 2016 Schedule of Fixed Assets PMU/PRMP Financial Year 2015-16 Category Nos. Location Machineri & Maintenance Fax 3 PMU/PRMP Server 2. Heavy Duty UPS for Server 2 Laptop Computers (IBM, Sony7Toshiba) 15 PDA (Personal Digital Assistant)/ Pocket PC/ Black Berry Devices 3 Computer(branded) width Superdrive & Flat Screen TFT Monitors 19 Heavv Duty Laser Printer B&W Duplex/ Network 1 Heavy Duty Color Laser Printer Duplex/ Network 1 UPS 37 Laser jet Printer 10 Inkjet printer HP 1 Photocopier 2 Multimedia projector with Screen 3 Diqital Camera SLR 1 Video Camera 1 DVD Recorder+ VCR 1 Audio Visual Peripheral Accessories for AV section 1 Scanner 3 CCTV Cameras 5 TV Set + LED + LCD 3 Overhead Projector 1 External USB Bc1ckup Drive 1 Paper Shredder 1 Air cond.(split) 17 PMU/PRMP Air Cooler 1 Refrigerator 1 Microwave 1 Heavy Duty Stabilizer 3
Generator(30 KVA) 1 Vacuum Cleaner 1 Water Filter 1 Pedestal fan 8 Bracket Fan 24 Water Dispenser 3 Vehicles Vehicles (1300 cc) 6 PMU/PRMP Vehicles (1000 cc) 4 Vans 2 Suzuki Carry van 1. Motorcycle (70 cc) 2., - Furniture & Fixture Working Counters 23 sft PMU/PRMP Officer Table 1