19 APR 2017 RECEIVED Small and Medium Enterprise Access to Finance Project ("SMEA2F") Financial Statements and Independent Auditors' Report Year ended 30 September 2016 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized loon Member Firm of KPMG International
Contents Page Project information 1 Statement of management's responsibilities 2 Independent Auditors' Report 3-4 Statement of cash receipts and payments 5 Statement of designated bank account 6 Notes to the financial statements 7-12 Budget and actual payments (Appendix 1) 13-14 Loan utilization report (Appendix 2) 15
Project information Project Funding agencies Small and Medium Enterprise Access to Finance ("SMEA2F") IDA H958-LA and IDA 5471-LA International Development Association ("IDA") Duration 15 September 2014 to 30 June 2019 Implementing agency National Implementation Unit ("NIU") Department of Planning and Cooperation ("DPC") ("MOIC") Project director Mr. Phouvieng PHONGSA Deputy Director General of DPC and Director of NIU Registered Office Phonexay Road, P.O. Box 4107 'Vientiane Capital, Lao PDR Auditors KPMG Lao Co., Ltd.
D r, eturnznt Department of Planning and Cooperation Statement of Management's Responsibilities It is the responsibility of management to prepare financial statements of the Small and Medium Enterprise Access to Finance Project ("the Project") for the year ended 30 September 2016, which are prepared in all material respect in accordance with the accounting policies as described in Note 2 to the financial statements. In preparing these financial statements, management is required to: * Select suitable accounting policies and apply them consistently; * Make judgments and estimates that are reasonable and prudent; * Maintain financial records and prepare the financial statements based on the accounting policies as described in Note 2; and * Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Project will continue its operations. Project Management of is responsible for keeping proper accounting records, which disclose with reasonable accuracy, at any time, the financial position of the Project. Members of project management have a general responsibility for taking such steps as are reasonably available to them to safeguard the assets of the Project and to prevent and detect fraud and other irregularities. Project Management confirms that the Project has complied with the above requirements in preparing the financial statements. On behalf of the management Phouvieng PHONGSA V Sodavanh Souvannaphoum Deputy Director General NIU Manager Director of NIU Department of Planning and Cooperation Department of Planning and Cooperation Date: 12 APR 2017 Date: 1 2 APR 2017 2
KPMG Lao Co.,Ltd. 49?fni~o#A 3r 4th Floor, 37 K.P. Tower qi1i 3-4, 37 Fn cow-moco 23 Singha Road, Ban Phonexay, t%lai 23 Rom, 6u,93lmA:q, Saysettha District, P.O. Box 6978 Ymun, 5 LJe U.. 6978, Vientiane Capital, Lao PDR 3eVeLo5o53J, OA d mo Tel +856 (21) 454240-7 +856 (21) 454240-7 Independent Auditors' Report To the Project Management, We have audited the accompanying financial statements of the Small and Medium Enterprise Access to Finance Project ("SMEA2F" or "the Project"), which comprise the statement of cash receipts and payments for the year ended 30 September 2016, the statement of the designated bank account for the year then ended, and notes, comprising of a summary of significant accounting policies and other explanatory information from page 7 to page 12. The financial statements have been prepared by management based on the accounting policies as described in Note 2 to the financial statements. Management's Responsibility for the Financial Statements Project Management is responsible for the preparation of these financial statements in accordance with the accounting policies as described in Note 2 to the financial statements, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors' responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity's preparation of the financial statements 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 entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. KPMG Lao Co-, Ltd a Company licensed under the Foreign Investment Law of Lao PDR, isa memberof KPMG International, a Swiss cooperative
Opinion In our opinion, the financial statements of the Project for the year ended 30 September 2016 are prepared, in all material respects, in accordance with the accounting policies as described in Note 2. Basis of Accounting and Restriction on Use Without modifying our opinion, we draw attention to Note 2 to the financial statements, which describes the basis of accounting. The financial statements are prepared to provide information to the Project Management of Small and Medium Enterprise Access to Finance Project to report to the donor IDA. As a result, the financial statements may not be suitable for another purpose. Our report is intended solely for the Project management and the donor IDA and should not be used by parties other than the Project management and the donor IDA. KPMG Lao CT Vientiane Capital, Date: 12 APR 2017 PMG LAO KPMG Lao Co, Ltd, a Company licensed under the Foreign Investment Law of Lao PDR, is a member of KPMG International, a Swiss cooperative 4
Statement of cash receipts and payments For the year and period ended 30 September 15 September 2014 to 30 September 30 September Note 2016 2015 Receipts 3 4,463,770 1,021,393 Payments Line of credit to Participating Financial Institutions ("PFIs") 4 4,000,000 - Technical Assistance 5 470,096 72,808 Total Payments 4,470,096 72,808 Excess of receipts over payments (6,326) 948,585 Fund balance at the beginning of the year/period 948,585 Fund balance at the end of the year/period 942,259 948,585 Represented by: Cash on hand and cash at bank 6 939,920 948,011 Advance 2,339 574 942,259 948,585 Phouvieng PHONGSA Sodavanh Souvannaphoum Deputy Director General NIU Manager Director of NIU Department of Planning and Cooperation Department of Planning and Cooperation Date: 1 2 APR 2017 Date: 1 2 APR 2017 5
Statement of designated bank account Year ended 30 September 2016 15 September 2014 to 30 September 30 September Note 2016 2015 Receipts 3 4,463,770 1,021,393 Payments Line of credit to PFIs 5 (4,000,000) - Payments made out of project's accounts 4 (470,096) (72,808) Increase of cash at project's operating accounts 6 (38,219) (26,450) Increase in advance (1,765) (574) Decrease/(Increase) of cash on hand 6 83 (200) (4,509,997) (100,032) Excess of receipts over payments (46,227) 921,361 Fund balance at the beginning of period 921,361 - Fund balance at the end of the year/period 875,134 921,361 Represented by: Cash at designed bank account 6 875,134 921,361 Phouvieng PHONGSA Sodavanh Souvannaphoum Deputy Director General NIU Manager Director of NIU Department of Planning and Cooperation Department of Planning and Cooperation Date: 1 2 APR 2017 Date: T2 APR 2017 6
Notes to the financial statements Year ended 30 September 2016 These notes form an integral part of, and should be read in conjunction with, the accompanying financial statements. 1. Principal activities The ("the Project") is supported by the International Development Association ("IDA") of the World Bank under Contract Credit No.5471 - LA and Grant No. H958-LA; (dated 14 August 2014 and amendments to the financial agreement dated 24 November 2016), which is implemented by the ("MoIC") Lao PDR. The objective of the Project is to provide long-term funding sources for banks to provide long-term credit to Small and Medium Enterprises ("SMEs"). The project consists of the following parts: Part 1: Line of Credit Facility Provision of a line of credit facility to Participating Financial Institution ("PFI") for extending longterm local currency loans to SMEs for the implementation of Specific investment sub-projects. Part 2: Technical Assistance 2.1 Provision of technical assistance to Department of Small and Medium Enterprise Promotion ("DOSMEP") and other relevant agencies to strengthen their capacity to formulate and implement strategies, policies, investments and other activities related to the promotion of SMEs, and to implement, monitor and evaluate the project. 2.2 Provision of technical assistance to Participating Financial Institutions and other relevant financial institutions to improve their SME banking strategies, products and practices, including their compliance with environmental social due diligence and safeguard requirements. 2.3 Provision of technical assistance to SMEs to build their capacity in business development and administration and financial management. The main activities of the Project in the period are set out in the comparison of budget and actual expenditure. 7
Notes to the financial statements (continued) Year ended 30 September 2016 2. Summary of significant accounting policies The following significant accounting policies have been adopted by the Project in the preparation of these financial statements: a) Basis of financial statements preparation The financial statements of the Project consist of the statement of cash receipts and payments and statement of designated bank account, which is expressed in United States Dollars (""), has been prepared in accordance with the cash modified basis of accounting. The accounting policies have been applied consistently throughout the period. b) Fixed assets All purchases of fixed assets are recorded as payments in the statement of cash receipts and payments upon acquisition. The Project maintains a Fixed Assets Register for control purposes. c) Cash Cash comprises cash on hand and balances with banks. d) Foreign exchange The Project maintains its accounting records in in accordance with the grant agreement. All cash is held in. Transactions in currencies other than during the period have been translated into at rates approximating those ruling at the transaction dates. All exchange differences are recorded in the statement of cash receipts and payments. e) Accounting reporting period The financial accounting year of Government of Lao PDR starts on 1 October and ends on 30 September. During the current year, Government of Lao PDR announced a new financial accounting year starts on 1 January and ends on 31 December which is effective for fiscal years beginning on or after 1 January 2017. f) Comparison of budget and actual payments The approved budget is developed on the same accounting basis, same classification basis and for the same period as for the financial statements. g) Receipt recognition Fund receipt from IDA is recognised as receipt when cash is credited to the project's designated account. The IDA may make direct payments, at the Project's request, directly to a third party for eligible expenditures. 8
Notes to the financial statements (continued) Year ended 30 September 2016 h) Payment recognition Payments incurred in the frame work of the Grant Agreement are recognised on the cash basis of accounting, i.e. when the payments are made. Categories ofpayments I Consultants' Services, Non-Consultant services; Training and workshop, Incremental Operating Costs and Goods The reasonable costs of goods and non-consulting services required or the day to day coordination, administration and supervision of project, including leasing and/or routine repair and maintenance of vehicles, equipment, facilities and office premises, fuel, office supplies, utilities, consumables, communication expenses (including postage, telephone and internet costs), translation, printing and photocopying expenses, bank charges, publications and advertising expense, insurance, Project-related meeting expense, Project - related travel, subsistence and lodging expenses, and other administrative costs directly related to the project, but excluding salaries, bonuses, fee and honoraria or equivalent payments of members of the recipient's civil service. I. Direct payments The IDA may make direct payments, at the Project's request, directly to athird party for eligible expenditures. III. Line of credit to Participating Financial Institutions ("PFIs") i) Advances Line of credit facility is provided under the financing agreement for the Small and Medium Enterprise ("SME") to provide loans to small and medium-scale borrowers for expanding their production activities and employment. Advances, for activities such as workshops, conferences, monitoring trips, are reimbursable to the project until expensed by the Implementing Agencies ("IA"). Advances are recognized as expenditure after the advance has been liquidated and the expenses reports are approved. Advances are requested by IA from the Project through formal advance request forms. 9
Notes to the financial statements (continued) Year ended 30 September 2016 3. Receipts 15 September 2014 to Reference 30 September 30 September No: Description 2016 2015 01/A2F-CRE Fund Received from WB 2,000,000-05/A2F-GRA Fund Received from WB 1,500,000 500,000 06/A2F-GRA Fund Received from WB 668,589 500,000 04/A2F-GRA Fund Received from WB 217,606 21,393 07/A2F-GRA Fund Received from WB 77,575-4. Line of credit to Participating Financial Institutions Line credit to PFIs (ST bank) 2,000,000 4,463,770 1,021,393 15 September 2014 to 30 September 30 September 2015 2015 Line credit to PFIs (Lao-China Bank) 2,000,000-5. Technical Assistance Consultant services 4,000,000-15 September 2014 to 30 September 30 September 2016 2015 International project advisor 49,392 12,405 National procurement Officer 30,000 - International procurement advisor 29,443 3,702 National finance Officer 19,767 8,466 International finance specialist 17,100 - National program Specialist 16,000 Consulting firm 11,220 National Environment & Social Safeguards 11,160 10
Notes to the financial statements (continued) Year ended 30 September 2016 5. Technical Assistance (continued) 15 September 2014 to 30 September 30 September 2016 2015 National Project Coordinator 10,000 - National administrative officer 9,198 3,000 Environment and safeguards expert - 24,610 Training and workshop 203,280 52,183 DSA 10,535 255 Transport Cost 9,568 - Conference, Convention, Meeting 4,759 8,203 Other related costs 674-25,536 8,458 Incremental operating cost Other expenses 10,686 1,758 Supplies 5,685 3,108 Driver SMEA2F 4,500 - Advertisement 4,429 1,533 Communication 1,739 1,002 Books, Subscriptions, Reference 1,217 81 Fuel for office work 423 509 Printing and Copying 379 361 Bank Charges 146 75 Goods 29,204 8,427 Project Vehicle 139,028 - Office Equipment 45,573 3,740 Office furniture 27,475-212,076 3,740 470,096 72,808 11
Notes to the financial statements (continued) Year ended 30 September 2016 6. Cash on hand and cash at bank 15 September 2014 to 30 September 30 September 2015 2015 Designated bank account: Bank of Lao 875,134 921,361 Operating bank account: Lao Viet Bank 64,669 26,450 Petty cash 117 200 939,920 948,011 12
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Budget and actualpayments Year ended 30 September 2016 (Appendix 1) Analysis of variances between budget and actual payments (Not audited) Most activities were under spent during the period from I October 2015 to 30 September 2016. As a result during the period a work plan was prepared but the nature of the work plan included only activities for the component 2 "Technical Assistance", but not include all budgets which shall be incurred in the period, such as no budget for Component I " Line of Credit", no budget for all existing consultants cost (contract signed with the project) and other operating costs. Due the existing work plan was not suitable for implementation of the project, therefore, the project management with consultation of project advisors formulated and prepared a new six months work plan cover the period from July to December 2016 and was approved by the World Bank on 12 September 2016. The actual expenditure of the project shown in the above has been recorded in line with the work plan and activities approved. 14
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