ADDITIONAL FINANCING OF VIET NAM MEDIUM CITIES DEVELOPMENT PROJECT PHU LY CITY SUB-PROJECT Financing Agreement No.6070-VN and Financing Agreement No.6071-VN AUDITED FINANCIAL STATEMENTS FOR THE PERIOD FROM 01 JANUARY 2021 TO 31 DECEMBER 2021 May2022 ADDITIONAL FINANCING OF VIET NAM MEDIUM CITIES DEVELOPMENT PROJECT-PHU LY CITY SUB-PROJECT FInancing Agreement No,6070-VN and Financing Agreement No.6071-VN TABLE OF CONTENTS CONTENT PAGES) PART I FINANCIAL STATEM ENTS ................................................................................................... 1 STATEMENT OF THE PROJECT MANAGEMENT UNIT 2................................ .... ...2 INDEPENDENT AUDITORS' REPORT ON THE FINANCIAL STATEMENTS .............. __3 B A LA N C E S H E ET.........................................................__ . . ............. ...... 6 STATEMENT OF PROJECT IMPLEMENTING EXPENDITURES. ...... .......... .... _7 STATEMENT OF FUNDS AND EXPENDITURESP.DTE.. .......... . ............... _ ...... 8 STATEMENT OF SOURSES AND USES OF FUNDS ................---------.---... .,_.9 STATEMENT OF DESIGNATED ACCOUNT.................... ....... ......................... .___A1 STATEM ENT OF W ITHDRAW AL....E.N...O..FW.....H-----AWAL------__........ . .......... ..._11 NOTES TO THE FINANCIAL STATEMENTS..... .......... _ -----.__ .---............................12 PART II INDEPENDENT AUDITOR'S ASSURANCE REPORT ON COMPLIANCE.......................18 PART III INDEPENDENT AUDITOR'S ASSURANCE REPORT ON THE INTERNAL CONTROL..22 PART IV MANAGEM ENT LETTER .................................................................................................... 25 PART I FINANCIAL STATEMENTS 1 ADDITIONAL F INANCiNG OF VIET NAM MEDIUM CiLS DEVELOPMENT PROJLCT-PHU LY CITY SUB-PROJECT InanciAreemnt N 1 6T-V iN and inanini Arjeerernt No 6071-VN STATEMENT OF THE PROJECT MANAGEMENT UNIT Medium Cities Devepent Project - Phu Ly CIty Sub-praject (hereinafter referred to as Ovh Parject far the pere d from 01 Januar y 2021 ta 31 Decernber 2021. Project Management Unit Memeris of the Prject Managertnt Und who hel ee during the periad and ta the date af this repa nclde: Mr. Nuyen HAnh Tuan Dir Cetor Ms. Pm Tiii uynh Chi Vice Direcdor M r. Nguyen Hong Tanh Vice Direcor Ms. 1ai 1ThY Hoa Clhef Accn tant Responsibilities of the Project Management Unit - is respunsibe fr preparing F irn:nci St temenls which give a tru: and fair view of balance of assets, S Iab ues ana fund s as at 31 December 2021 as weil as the tunds areved and sbursernents made for ffe peruod fro1 01 January 2021 to 31 December 2021 in accordance with the accaunting polcies as stated in Nute 2 and Note 3 o3f the Notes to the Financeial Statements and provisions el the Financinig Agreemeunt No.600VN andt Financing Agree men: iNo 60711-VN. In pre'paring those tinancial statements, the PMU .s requcired to: * Select suifable accountiing policies and then: apply tthenm cansistently; * Make judgments and estimates that are reasonable and prudent; * State whether applicabie accountng prineiples have been followed, subject ta any material departures disciaosed and explained in the financial statements; • Prepare the fnanciaI statements on the gning cancern Lasic uniess it s inappropriate ta the prcsurn thlat tile Praject wil conitinue in operation; and 9 Design and maintain an effective internai Oneatrol over compliance with requ:rements that euid have a direct and material financial effect an tthe financial statemernts as we. as over finanial reportng far :he purpse of praperly preparing and presenting the financial statements sa as to minimize errors and frauds; and take respo=sihiiity tr its assertons as ta the ettectiveness of such internal cant.ro Ilhe 1'MU is re ibsponsie tar ensuring that praper asecunting m recrds are kept which discUse, witti easonab e aceuracy at any time, th i: financl positin of the IProjct nid ta enre that the financial statements cotmIy with the acountng system s as dese bed in Notes te the Financial St:te ents as wel a law s and uther pvision appicatule tu the Project. They are also respansible for saferguaring the assets ut the Projeet and hence fnr taking reasanable stelp ar thte prvention and detection of raiud and other iisrgurarities. The PMU cailirms that they have complied with lt ahove requireets in prepainig the Finaneial Statemiens, For and on behatf of the Project Manago:nonr Uuit) Nguyen Ha Anh Tuan Direc tor No: 332/2022UHY - BCKT INDEPENDENT AUDITORS' REPORT ON THE FINANCIAL STATEMENTS To: The Project Management Unit Additional Financing of Vietnam Medium Cities Development Project Phu Ly City Sub-project Opinion We have audited the financial statements of Additional Financing of Vietnam Medium Cities Development Project - Phu Ly City Sub-project (the Project), which comprise the Balance Sheet as at 31 December 2021, the Statement of Project Implementing Expenditures, the Statement of Funds and Expenditures, and the Statement of Sources and Use of Funds, the Statement of Designated account, and the Statement of withdrawal for the period from 01 January 2021 to 31 December 2021, and notes to the financial statements, including a summary of significant accounting policies. In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Project as at 31 December 2021, and of its receipts, disbursements, expenditures and fund withdrawals of the Project for the period from 01 January 2021 to 31 December 2021, in accordance with the accounting convention and the accounting policies set out in Note 2 and Note 3 of the Notes to the Financial Statements. Emphasis of matter We draw reader's attention to Note 2 and Note 3 of the financial statements, which describes the accounting convention and the summary of the significant accounting policies adapted in accordance with the requirements of the World Bank. Our opinion is not modified in respect of this matter. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing ("ISAs"). Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the Financial Statements section of our report. We are independent of Project in accordance with the international Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants ("IESBA Code"), together with the ethical requirements that are relevant to our audit of the financial statements in Vietnam and we have fulfilled our other ethical responsibilities in accordance with the these requirements and IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of the Project Management Unit and those charged with governance for the Financial Statements The Project Management Unit is responsible for the preparation and presentation, of the financial statements in accordance with the accounting convention and the accounting policies set out in Note 2 and Note 3 of the Notes to the financial statements and for such internal control as the Management determines is necessary to enable the preparation and presentation of the financial statements that are free from material misstatement, whether due to frauds of errors. 1 1 5t"01h Fo r 2 T w r ri il u i( I r l, DH i MF W1,dI sil . Hanoi VIetnar INDEPENDENT AUDITORS' REPORT (CONT'D) Responsibilities of the Project Management Unit and those charged with governance for the Financial Statements (cont'd) In preparing the financial statements, the management is responsible for assessing the Project's ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless the management either intends to liquidate the Project or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Project's financial reporting process. Auditor's Responsibilities 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 ISAs 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 ISAs, 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. 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, Conclude on the appropriateness of management's use of the going concern basic of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Project's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Project to cease to continue as a going concern, 4 INDEPENDENT AUDITORS' REPORT (CONT'D) We communicated with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies ir internal control that we identify during our audit. UHY AUDITING AND CONSULTING AASC AUDITING FIRM COMPANY LIMITED COMPANY LIMITED Nguyen Thi Thu Ha Nguyen Pham Hung Auditor Auditor Auditor's Pra ng Certificate Auditor's Practicing Certificate No.2277-2018-1 2-1 No. 2893 -2020-002-1 Dao Xuani Dzung Do Manh Cuong Chairman Deputy General Director Audito s Practicing Certificate Auditors Practicing Certificate No. 0284-2018-112-1 No. 0744-2018-002-1 Hanoi, 20 May 2022 5. ADDITIONAL FINANCING OF VIET NAM MEDIUM CITIES FINANCIAL STATEMENTS DEVELOPMENT PROJECT - PHU LY CITY SUB-PROJECT For the period from 01/01/2021 Financing Agreement No.6070-VN and Financing Agreement No.6071-VN to 31/12/2021 BALANCE SHEET As at 31 December 2021 3111212021 01101/2021 Note VND VND ASSETS 1. Current assets 75,637,941,983 30,537,252,416 Cash 48,261,767,610 25,764,785,982 Cash in bank 6 48,261,767,610 25,764,785,982 Receivables 27,376,174,373 4,772,466,434 Advanced payment to suppliers 7 27,376,174,373 4,772,466,434 11. Project's expenditures 246,105,666,430 95,655,114,768 Project implementing expenditures 246,105,666,430 95,655,114,768 TOTAL ASSETS 321,743,608,413 126,192,367,184 . Liabilities 51,040,156,646 20,942,128,890 Payables to suppliers 8 51,031,775,020 20,931,822,800 Other payables 8,381,626 10,306,090 11. Funds 270,703,451,767 105,250,238,294 Funds for Project's implementation 271,590,547,890 105,552,027,310 IDA funds 9 232,386,747,890 83,939,027,310 Counter-part funds 10 39,203,800,000 21,613,000,000 Other funds (887,096,123) (301,789,016) Foreign exchange difference (906,729,123) (321,789,016) Receipts from Sale of bidding documents 19,633,000 20,000,000 TOTAL RESOURCES 321,743,608,413 126,192,367,184 OFF BALANCE SHEET ITEMS 31112/2021 01101/2021 USD USD Designated Account 2,021,43883 451,370.62 Nguyen Ha Anh Tuan Lai Thuy Hoa Lai Thuy Hoa Director Chief Accountant Preparer Phu Ly City, 20 May 2022 The accompanlying notes are an integtal part of the Financial Statements 6 ADDITIONAL FINANCING OF VIET NAM MEDIUM CITIES FINANCIAL STATEMENTS DEVELOPMENT PROJECT - PHU LY CITY SUB-PROJECT For the period from 01/01/2021 Financing Agreement No-6070-VN and Financing Agreement No-6071-VN to 31/12/2021 STATEMENT OF PROJECT IMPLEMENTING EXPENDITURES For the period from 01 January 2021 to 31 December2021 Period from 01/0112021 Accumulated to to 31112/2021 31/1212021 VND VND Urban Basic Infrastructure Upgrading and Service 33,755,361,500 80,490,176,600 Improvement 2 Urban Environment Sanitation 86,394,034,000 126,066,885,000 3 Urban Roads and Bridges 4 Project Management Support and Technical 12,204,084,054 15,025,555,554 Assistance 5 Land Acquisition, Resettlement and Ohers expense 15,687,880,382 17,620,362,050 6 Profiect Management expenses 2,408,619,620 6,882,134,320 7 Other expenses 572,106 20,552906 150,450,551,662 246,105,666,430 Nguyen Ha Anh Tuan Lai Thuy Hoa Lai Thuy Hoa Director Chief Accountant Preparer Phu Ly City, 20 May 2022 The accompanyinq notes are an integral part of the Financial Statements 7 ADDITIONAL FINANCING OF VIET NAM MEDIUM CITIES DEVELOPMENT PROJECT PHU LY CITY SUB-PROJECT FINANCIAL STATEMENTS Fiomrn Agreement No.6070-VN and Financing Agreement No.6071-VN Fo te period from 91/01 2021 o 112021 STATEMENT OF FUNDS AND EXPENDITURES ( ) For the pero d -rom 01 January 2021 to 31 Decem-,b 2021 Contents Year 2021 Accumulated to 31/1 212021 IDA funds Counterpart Other funds Total IDA funds Counterpart Other funds Total funds funds VND VND VND VND VND VND VND VND I. FUNDS 147,862,780,473 17,590,800,000 (367,000) 165,453,213,473 231,480018,767 39,203,800,000 19,633,000 270,703,451,767 - IDA 'unds 148,447,720,580 - 1447,720,580 232 -9232386747,8S0 - Counteroart funds (.,90,800,00 - 0,800,,800,000 - 39,203,800,000 - 39,203,800,000 - Foreign exchange difference (584,940,107) - (584,940,107) (906,729,123) - - (906,729,123) - Sale of bidding documents - (367,0û0) (367,000) - 19,633,000 19,633,000 I. EXPENDITURES 132,354,051,660 18,096,500,002 150,450,551,662 221,583,537,060 24,502,496,370 19,633,000 246,105,666,430 - Uran Basic Infrastructure 33,755,361,500 - 33,755,361 500 80,490,176,600 - 80,490,176,600 Upgradin and Service Improvement - Urban Environment San-tation 86,394,034,000 - - 86,394,034,000 126,068,885:030 - - 126,066,885,000 - Urban Roads and Bridges - Poject Management Support and 12,204,084,054 - - 12,204.084,054 15,025,555,554 - 15,025,555,554 Technical Assistance - Land Acquisi,ion. Resettlement and - 15,687,880,382 - 15,687,880,382 - 17820,352,00 - 17,620,362,050 Oher Expenses - Prcjec: Management expenses (*) - 2, - 2,408,619,620 - 6,882,134,320 - 6,882,134,320 - O:her expenses 572,106 572,106 919,90- 19,633,000 20,552,906 Ill. SURPLUS/(DEFICIT) 15,508,728,813 (505,700,002_ (367,0001 15,002,661,811 9,896,481,707 14 701,303630 24597785,337 Represented by: Cash 48,261 767,610 Receivables 27,376, 74,373 Liab:i t es (51,040,156,646) 24,597,785,337 (> Accurulated figures Ineudes VND 947,000,000 of furds and expenditures from counterpait funds, transferred from the eriginal project to the additional project. Nguyern Ha Anh Tuan Lai Thuy Hoa Laj Thuy Hoa Director Chief Accountant Preparer Pliu Ly City, 20 May 2022 7Te accompany11in ns aro an1 integral part o[ tha Finanial1 Staomnns 8 ADDITIONAL FINANCING GF VIET NAM MEDIUM CITIES DEVELOPMENT PROJECT - PHU LY CITY SUB-PROJCi FINANCI AEMENTS Firarcing Agreement No.6070-VN and Fnancing Agreement No -071VN For the period frm 01101202 31/122021 STATEMENT OF SOURCES AND USES OF FUNDS (*) For the period from 01 January 2021 to 31 December 2021 Year 2021 Accurnulated to 31/1212021 DA funds Counterpart Other funds Total IDA funds Counterpart Other funds Total funds funds VND VND VND VND VND VND VND VND - RECEIP S 148447,720,580 17,590,800,000 (367,000) 166,038,153,580 232386747,890 39,203,800,000 19,633,000 2716510,180,890 J DA finds 148,447,720,580 - 148,447,720,583 232,386,747,$90 -- 23239747,890 - Counteroart funds (* - 17590,800000 17,590,800,000 - 39,203,800,000 - 39203,800,000 - Sale ef bidding ocuments - (367,000) (367,000) - 19,633,000 19,633,000 I1. DISBURSEMENTS 112,458,715,006 30,495,592,375 - 142,954,307,381 185,694,429,040 36,736,003,743 19,633,000 222,450,065,783 - Urban Basic infrastrucu.re Upgrading 25,186,930,400 - 25,186,930,400 C1 275,132,200 - 61,275,132,200 and Service iprovement Urban Environment Sanitation, 80,143,333,000 - - 80 ,43,333 000 113,442,615,000 - - 113,442,815,000 - Uban Roads and Bridges - - Project Management Support and 7,127,879,500 - - 7,127,879 500 10,975,561,934 - 10,975,561,934 echnical Assstance - Lane Acqu,Siticn, Resettlernent and - 28 086,972.755 - 28.086,972,755 - 29,853,869,423 - 29,853,869,423 Oher Consuitation Expenses - Pof[et Management expenses () - 2408,619,620 - 2,408,619,620 - ,882,134,320 - 68,U2,134,320 - Others expense 572,106 - - 572,106 919,900 - 19,633,000 20,552,906 Excess(Deficits) of Recelpts over 35,989,005,574 (12,904,792,375) (367,000) 23,083,84G,199 46,692,318,850 2,467,796,257 - 49,160,115,107 Disbursemnents ti -I11) ]il. Foreign exchange differences (584,940,107) - (584,940,107) (906,729,123) - (906,729,123) Ill. OPENING BALANCE 10,381,524,260 15,372,588,632 367,000 25,754,479,892 - IV. ENDING BALANCE 45,785,589,727 2,467,796257 - 48,25385,984 45,785,589,727 2,467,79C,257 - 48.253385 984 Represented by: Cash 49,261,767 610 Other payables not relatod to expenditures . (9,301,620) 48,253,385,984 Accumulated figures Jncludes VND 947,000,000 of funds and expenditures from counterpart fnds, transerred from the orig na poject to the additional project, Ng uyen HaAnh Tuan Lai Thuy Hoa Lai Thuy Hoa Director Chief Accountant Preparer Phas LY Care n 2e prfF202 ADDITIONAL FINANCING OF VIET NAM MEDIUM CITIES FINANCIAL STATEMENTS DEVELOPMENT PROJECT - PHU LY CITY SUB-PROJECT For the period from 01101/2021 Financing Agreement No.6070-VN and Financing Agreement No.6071-VN to 31/12/2021 STATEMENT OF DESIGNATED ACCOUNT For the period from 01 January 2021 to 31 December 2021 Account No.: 1014712914 Depositary Bank: Saigon - Ha Noi Commercial Joint Stock Bank - Ha Nam Branch Financing Agreement: 6070-VN and 6071-VN Currency: USD From 15112/2017 Year 2021 to 31/1212020 USD USD PART A: ACCOUNT ACTIVITIES Opening balance of designated account 451,370.62 Add Total amount advanced by the World Bank to the Designated 6,494,401.00 3,620,245.00 Account in the year Deduct Total amount withdrawn 4,924,307.79 3,168.859,38 Bank charges 25.00 15.00 Ending balance of designated account 2021,438.83 451,370.62 PART B: RECONCILIATION Opening balance of advances by the World Bank 1,705,820.20 Add Total amount advanced by the World Bank to the Designated 6,494,401.00 3,620,245.00 Account in the year Deduct Total amount applied for advance clearance and approved by 6,107,647.17 1,914,424.80 the World Bank Oustanding advance from the World Bank to the Designated 2,092,574.03 1,705,820.20 Account at the year end Ending balance of advance account 2,021,438.83 451,370.62 Add Amount withdrawn but not yet claimed 71,095.20 8,307.86 Amount claimed in but not yet approved by the World Bank - 1,246,126.72 Overseas bank charges . 40.00 15.00 Total advance accounted for at the year end 2,092,574.03 1,705,820.20 Nguyen Ha Anh Tuan Lai Thuy Hoa Lai Thuy Hoa Director Chief Accountant Preparer Phu Ly City, 20 May 2022 The accompanying nooes are an integral pad of the Financial Statements 10 ADDITIONAL FINANCING OF VIET NAM MEDIUM CITIES DEVELOPMENT PROJECT - PHU LY CITY SUB-PROJECT FINANCIAL STATEMENTS Fin cing Agree meni No 6070-VN and Financing Agreement No.6071-VN For the period froi 11 01/2021 31 2 201 STATEMENT OF WITHDRAWAL For the period from 01 January 2021 to 31 December 2021 Withdrawal Appications Amount Amount claimed for advance clearance Ammnt received Difference cialmed for ~¯ar Bas Pr: est disbursement fraslructure Ursan , 1Maamet Ant asproved Jrkan Roads Amunt -c No. Date Curreny (Advance) Lpgrading and Emironment an Lrid;es S7pt aro #otal (b) Sale d.sbursed ( far advanse (a-d) (a) Sernlse Sanitation Tertcal clearance (di 1 mprovem ent Ass s:ase____________________ Accurmated to 3112/2020 1USD 4,050,680.00 1,561,341.09 1440,896.53 158,313.90 3,160,551.52 3,620,245.00 1,914,424.80 1,676,561.72 (*) Inareases during the year USD 6,063,966,00 1,046,291,19 3,511,44288 303,786.33 4,861,520.45 6,494,40100 6,107,647.17 (1,676,561 72) Advance account 6,063,966.00 1,046,291.19 3,511,44288 303,786,38 4,861,520.45 6,494,401.00 6,107,647.17 (1,676,561,72) 05/DAPL-IDA 29/12/2020 USD - 58/01/2021 430,435.00 1,246,126-72 (1,676,561 72) (*) 07DAPL-IDA 16t04/202l USD 1,173,046.00 415,795.11 148 372.27 - 564,70.38 1/5202 1,173,046.00 564,170.38 0/DAPL-SUF '6.04/2021 UD 1,932,634.00 2116 97725 6,917 25 0412021 1 932,634.D0 116, 97.25 C-DA' L C4/102021 USD - - 226,759 c- 15,425.89 393,17299 21/15.2021 - 393179.99 D9/DAPL-SUF '140/202 1 0US 2,109,285.00 366,666.93 1,765,118.1 - 221,7844 20102021 2,109,286.05 2,121 765.44 1 A-SUF 21/'2/2021 USD 849,000.0 273,826.25 1371,192.90 20,44824 165546739 23/12/2021 849,000.00 1,665,467.39 Accurrulated to 31/12/2021 10,114,646.00 2,607,632.2 4,952.339.41 462,100.28 5A022,071.97 10,114,646,00 8.0221071 97 (l) Diffeence s due to the Withdrawa] applications for advance clearance No,05/DAPL-IDA from the Financing Agreement No. Cr.6070-Vn that was dated 29 December 2020 with amount clIaned for advance is USD 430,435 and amount claimed for advance clearance is D 1,246,26.72 but accepted by World Bank on 08 JanLary 2021. Nguyen Ha Anh Tuan Lai Thuy Hoa Lat Thuy Hoa Director Chief Accountant Preparer Ph/tu Ly City 20 Moy 2022 Thc acmtpa g leny an ltogra pall of t Financial Statome s ADDITIONAL FINANCING OF VIET NAM MEDIUM CITIES FINANCIAL STATEMENTS DEVELOPMENT PROJECT - PHU LY CITY SUB-PROJECT For the period from 01/01/2021 Financng Agreement No.6070-VN and Financing Agreement No.6071-VN to 31/12/2021 NOTES TO THE FINANCIAL STATEMENTS (These notes are an integral part of and should be read in conjunction with the accompanying financial statements) 1. PROJECT BACKGROUND 1.1 The Medium Cities Development Project The Medium Cities Development Project (hereinafter referred to as the "Original project") operates under Credit Agreement No. 5013-VN dated 12 January 2012 signed between the Socialist Republic of Vietnam and the International Development Association ('IDA). The objective of the Medium Cities Development Project is to increase access to improve urban infrastructure service in Lao Cai City, Phu Ly City and Vinh City in a sustainable and efficient manner. The Medium Cities Development includes 03 Parts: (i) Pail A: Support to Lao Cai City; (ii) Part B: Support to Phu Ly City; (iii) Pail C: Support to Vinh City. The Medium Cities Development Project - Part B: Support to Phu Ly City includes the following components: Urban Basic Infrastructure Upgradng DService Improvement: Improvement of urban infrastructure and service conditions in existing or newly developed urban areas including construction and rehabilitation of basic infrastructure systems such as water supply and sanitation, drainage, power supply, lighting, roads, schools. Urban Environment Sanitation: Construction and rehabilitation of primary and secondary infrastructure for drainage, wastewater collection and treatment, and flood mitigation, including construction and rehabilitation of selected small lakes. Urban road and Bridges: Construction of urban roads and bridges. Project Management Support and Technical Assistance: Provision of support for (a) project management and supervision; (b) independent social, environment and financial account monitoring; (c) urban planning, asset management, safeguards, and intemal audit capacity building; (d) equipment and facilities including the acquisition of one car; (e) training and capacity building; and (f) management and administration. The total fund of the Project is USD 68.7 million, including: IDA funds : USD 57.5 million Counterpart funds : USD 11,2 million The Project has been implemented since 12 January 2012 (the date of the Credit Agreement) and completed on 31 December 2019 (Disbursement Deadline Date of the Project according to the Announcement dated 26 June 2019 of the World Bank). 1.2 Additional Financing of Vietnam Medium Cities Development Project The total cost of the Additional Financing of Vietnam Medium Cities Development Project (the "Project") is US$ 325,15 million, of which the total investment for the Parent Project is US$ 258,9 million and for the Additional Financing stage is US$ 53,0 million. This amount includes investments and costs related to land acquisition and resettlement, and all taxes. The Bank will finance 74% of the investments, while the Cities will finance the remaining 26% which is principally for land acquisition, resettlement, and PMU operational costs. The total financing from the Bank will be US$238.5 million, on IDAlIDA-SUF Terms. 12 ADDITIONAL FINANCING OF VIET NAM MEDIUM CITIES FINANCIAL STATEMENTS DEVELOPMENT PROJECT - PHU LY CITY SUB-PROJECT For the period from 01/012021 Financing Agreement No.6070-VN and Financing Agreement No.6071-VN to 31/12/2021 NOTES TO THE FINANCIAL STATEMENTS (CONT'D) (These notes are an integral part of and should be read in conjunction with the accompanying financial staternents) 1. PROJECT BACKGROUND (CONT'D) 1.3 Additional Financing of Vietnam Medium Cities Development Project - Phu Ly City Sub-project The total fund of the Project (according to Decision No. 351/CD-TTg dated March 21, 2017 of the Prime Minister) is USD 32.91 million, including: IDA funds . USD 26 million Counterpart funds : USD 6.91 million The Project has been implemented since 15 December 2017 (the date of the Financing Agreement) Additional Financing project duration: 03 years, from 31/12/2017 to 31/12/2020. The project has been extended to 30 June 2022 according to Decision No. 2235/QD-CTN dated 17 December 2020 of the President on extending the loan closing date of the Financing Agreements No. 6070 - VN and SUF Financing Agreement No. 6071 - VN for Vietnam Medium Cities Development Project. The Sub-project includes the following components: Component 1: Urban Basic Infrastructure Upgrading and Service Improvement fUSD 7.7 million) a Investment items using IDA fund: USD 6.5 million: - Construction of Phu Van kindergarten in Phi Van Commune, Phu Ly City: for 500 pupils; Construction of a kindergarten to meet the design criteria of national standard school according to Decision No- 36/2008 / QD-BGDDT dated 16/07/2008 in compliance to National Kindergarten Standards. The construction activities includes: classrooms and functional rooms; Areas for outdoor activities of children within kindergarten age range: Bio-landscape garden, sand playground, water- splash tank; green vegetable garden etc. - Upgrading Tran Quoc Toan Primary School, Hai Ba Trung Ward: Construction of a kindergarten to meet the design criteria of National Kindergarten Standards according to Decision No. 3212005/0D- BGDET dated 24/10/2005, The construction activities includes: classrooms and functional rooms; Areas for outdoor activities of children within kindergarten age range: Bio-landscape garden, sand playground, water-splash tank; greens and vegetable garden etc. b. Investment items using IDA SUF fund: USD 19.5 million - Upgrading infrastructure for the 03 low -incomes residential area, including: (1) Upgrading infrastructure for the residential area in the North Quang Trung Ward; (2) Upgrading infrastructure in Duong Am Community, Lam Ha Ward; and (3) Upgrading infrastructure in Quynh Chan Community, Lam Ha Ward. - Investments includes: (i) Upgrading existing internal roads; (ii) Installation of combined drainage- sewer pipelines; (iii) water supply pipeline expansion network connecting to the existing main supply; and (iv) Power supply for lighting system at some main roads. Component 2; Urban Water Supply and Environmental Sanitation (USD 9.2 million) a. Investment items using IDA fund: USD 6-5 million: - Upgrading Lam Ha 1 regulation lake, Lam IHa Ward: Investments includes: L.ake embankment improvement, Tree planting, lighting system ; Construction of path walk; Installation of interceptor sewers and wastewater separation wells or combine sewer overflow (CSO) around the lake to collect and transport wastewater to wastewater treatment plant. - Upgrading Drainage and Technical Infrastructure System for Bien Hoa Road: Installing the surface water and wastewater drainage syster; Re-surfacing of road and intersections; Rehabilitation of lighting power system: Upgrading sidewalk and greenery system. 13 ADDITIONAL FINANCING OF VIET NAM MEDIUM CITIES FINANCIAL STATEMENTS DEVELOPMENT PROJECT - PHU LY CITY SUB-PROJECT For the period from 01/012021 Financing Agreement No.6070-VN and Financing Agreement No.6071-VN to 31/12/2021 NOTES TO THE FINANCIAL STATEMENTS (CONT'D) (These notes are an integral part of and should be read in conjunction with the accompanying financial statements) 1 PROJECT BACKGROUND (CONT'D) 1.3 Additional Financing of Vietnam Medium Cities Development Project - Phu Ly City Sub-project (Cont'd) b Investment items using IDA SUF: USD 19.5 million - Construction of Chau Giang River Southern Embankment from Liem Chinh Bridge to Cau Gie-Ninh Binh Expressway: construction of embankment segment at the North riverside to prevent inland flood, facilitate the inspection and management of dikes in the storm and flooding season. Construction of Chau Giang River southern embankment from Liem Chinh Bridge to Cau Gie-Ninh Binh Expressway with total length of 3.300 km and construction of the prevention/ dike road of 1.8 km long and 13.5 m wide. Component 3: Urban Roads and Bridqes (USD 6.5 million) Investment items using IDA SUF fund: USD 19.5 million - Upgrading Tran Hung Dao Road from Liem Chinh Bridge to Cau Gie-Ninh Binh Expressway: Upgrading the route with alignment and cross-sectional size constructed based on the current existing road. Investments include: Rehabilitation with expansion of the existing road; drainage/lighting system; facilities for pedestrians; lighting system and greenery system. Alignment is followed the old DT 491 Road, in compliance with the city master planning. Component 4: Project Management and Technical Assistance _USD 1,2 million) Including: (i) IBRD1DA SUF source supports all activities of construction supervision, procurement, contracts management; Independent environmental and social safeguard monitoring, independent auditing etc. (ii) CF fund: costs of review/examination and evaluation; PMU staff salaries, office and other expenses related to PMU's management of the project. 2. ACCOUNTING CONVENTION AND FINANCIAL YEAR Accounting convention The accompanying financial statements, expressed in Vietnam Dong (VND), are prepared under the historical cost convention, except for the Statement of Designated Account and statement of Withdrawals which are expressed, in original currencies. These financial statement are prepared in accordance which the accounting policies set out in Note 3 and the requirement of the World Bank. The accompanying financial statements exclude figures in the Project preparation period. Financial year The Project's financial year begins on 01 January and ends on 31 December. These financial statements were prepared for the period from 01 January 2021 to 31 December 2021. 14 ADDITIONAL FINANCING OF VIET NAM MEDIUM CITIES FINANCIAL STATEMENTS DEVELOPMENT PROJECT - PHU LY CITY SUB-PROJECT For the period from 01/012021 Financing Agreement No,6070-VN and Financing Agreement No.6071-VN to 31/1212021 NOTES 10 THE FINANCIAL STATEMENTS (CONT'D) (These notes are an integral part of and should be road in conjunction with the accompanying financial statements) 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies, which have been adopted by the Project Management Unit in the preparation of these financial statements, are as follows: Foreign currency translation Transactions arising in foreign currencies are translated into Vietnam Dong (VND) at exchange rates ruling on the transaction date. The balances of monetary items denominated in foreign currencies at the balance sheet date are retranslated at the exchange rates on the same date. Foreign exchange differences are not cash flows. However, the effect of changes in foreign exchange rates is reported separately in the Statement of Sources and Uses of Funds in order to reconcile with balances of assets and liabilities in the Balance Sheet. Recognition of funds and expenditures Funds and expenditures are recognized when incurred, except for compensation expenditures for households which are recognized based on actual payment to beneficiaries and under State Treasury verification. 4. DESIGNATED ACCOUNT Designated Account is a deposit account in United State Dollar opened at Saigon - Ha Noi Commercial Joint Stock Bank - Ha Nam Branch for the implementation of the Project activities. Payments out of Designated Account are for expenditures in accordance with the relevant covenants of Financing Agreement No.6070-VN and Financing Agreement No.6071-VN and relevant regulations set by the World Bank, 5. STATEMENT OF SOURCES AND USES OF FUNDS Statement of Sourses and Uses of Funds is prepared based on actual cash flows; specifically: Cash inflow is the actual cash flow received from the World bank (WB), counterpart fund and other funds. Cash outflow is the actual cash outflow from the Project management unit for the project's cost items of this year and the amount paid to the supplier during the current year and those brought forward. Closing balance is based on the opening balance of cash flow plus cash inflows and minus cash outflow for the year. This balance is reconciled with the balance sheet items as at the end of the fiscal year. Accumulated figures are presented for the period from the commencement date of the Project to the end of the reporting period. 15 ADDITIONAL FINANCING OF VIET NAM MEDIUM CITIES FINANCIAL STATEMENTS DEVELOPMENT PROJECT - PHU LY CITY SUB-PROJECT For the period from 01/012021 Financing Agreement No.6070-VN and Financing Agreement No.6071-VN to 31/12/2021 NOTES TO THE FINANCIAL STATEMENTS (CONT'D) (These notes are an integral part of and should be read in conjunction with the accompanying financial statements) 6. CASH 31/12/2021 0110112021 USD Equivalent to VND USD Equivalent to VND Account in VND - 2,476,177,883 - 15,383,261,722 + Cash in treasury - 2,467,796,257 - 15,372,955,632 + BIDV - 7,375,720 - 9,302,343 + SHB - 1,005,906 - 1,003,747 Account in USD 2,021,438.83 45,785,589,727 451,370.62 10,381,524,260 + Designate Account 2,021,438,83 45,785,589,727 451,370-62 10,381,524,260 2,021,438.83 48,261,767,610 451,370.62 25,764,785,982 7. ADVANCED PAYMENT TO SUPPLIERS 31/12/2021 01101/2021 VND VND Urban Development Investment Corporation - Joint Stock 3,031,332,000 Company Hai Son Development Investment JSC 12,111,335,000 Phu Ly City Land Fund Development Center 12,233,507,373 - CEEN - Construction and Environmental Engineering JSC - 199,567,600 Joint Venture Hiep Thanh Company Ltd and Thanh Dat - 1,249,326,000 Development Investment JSC EXP International Services INC - 3,323,572,834 27,376,174,373 4,772,466,434 8. PAYABLES TO SUPPLIERS 31/12/2021 01101/2021 VND VND Urban Development Investment Corporation - Joint Stock 20,742,934,000 6,373,369,000 Company CEEN - Construction and Environmental Engineering JSC 112,089,400 142,441,000 Vietnam Construction and Environment JSC 920,799,500 2,354,488,500 Joint Venture Hiep Thanh Company Ltd and Thanh Dat 7,808,796,400 11,895,939,300 Development Investient JSC Hai Son Development Investment JSC 18,430,051,000 EXP INTERNATIONAL SERVICES INC 3,017,104,720 Huy Hoang Measuring Design Survey JSC - 165,585,000 51,031,775,020 20,931,822,800 9. IDA FUND Accumulated to 31/12/2021 Accumulated to 31/12/2020 USD VND equivalent USD VND equivalent Designated Account 10,114,64600 232,386,747,890 3,620,245 00 83,939,027,310 10,114,646.00 232,386,747,890 3,620 24500 83,939,027,310 16 ADDITIONAL FINANCING OF VIET NAM MEDIUM CITIES FINANCIAL STATEMENTS DEVELOPMENT PROJECT - PHU LY CITY SUB-PROJECT For the period from 01/012021 Financing Agreement No.6070-VN and Financing Agreement No-6071-VN to 31/12/2021 NOTES TO THE FINANCIAL STATEMENTS (CONTD) (These notes are an integral part of and should be read in conjunction with the accompanying tinancial statements) 10. COUNTERPART FUND Accumulated Accumulated to 31/1212021 to 31/1212020 VND VND The Counterpart funds transferred from the Original 947,000,000 947,000,000 project to the Additional Financing Budget for the Additional Financing 38,256,800,000 20,666,000,000 39,203,800,000 21,613,000,000 11. COMPARATIVE FIGURES The comparative figures are from audited financial statements for the period from 15 December 2017 to 31 December 2020. Nguyen Ha Anh Tuan Lai Thuy Hoa Lai Thuy Hoa Director Chief Accountant Preparer Phu Ly City, 20 May 2022 17 PART II INDEPENDENT AUDITOR'S ASSURANCE REPORT ON COMPLIANCE 18 rfJ ut)rIN ANI) ONSULTING GO LTD) STATEMENT OF THE PROJECT MANAGEMENT UNIT ON COMPLIANCE The Project Management Unit is responsible for complying with Financing Agreement No. 6070-VN and Financing Agreement No. 6071-VN, laws and regulation applicable to the Project. The Project Management Unit confirms the following: An effective internal control has been designed and maintained over compliance with Financing Agreement No- 6070-VN and Financing Agreement No. 6071-VN, laws and regulations applicable to the Project; * The Protect has complied with Financing Agreement No. 6070-VN and Financing Agreement No. 6071-VN, laws and regulations that could have a direct and material financial effect on the Project's financial statements for the period from 01 January 2021 to 31 December 2021; * The Project's receipts and disbursements via the designated account for the period from 01 January 2021 to 31 December 2021 are in accordance with the relevant covenants of Financing Agreement No. 6070-VN and Financing Agreement No. 6071-VN and prevailing relevant regulations established by the World Bank; * The withdrawal applications were adequately reconciled to the statements of expenditure (SOEs) prepared by the Project Management Unit for the period from 01 January 2021 to 31 December 2021 and those SOEs were adequately supported; * The proceeds of the loan were used only for the purposes of the Project; * The Project Management Unit has complied with the financial covenants of the Credit Agreement. For and on behalf of the Project Management Unit, Nguyen Ha Anh Tuan Director Phu Ly City, 20 May 2022 :i I loor, B2 Tower, o a Pln To H-onD treet, a Mo Ward, any u Lon Dstrct H non Victnami 19 i d uY intiaonal H PAD HN ANDDUN 7L*1G CO LTD INDEPENDENT AUDITOR'S ASSURANCE REPORT ON COMPLIANCE To: The Project Management Unit Additional Financing of Vietnam Medium Cities Development Project Phu Ly City Sub-project Report on compliance We have audited, in accordance with International Standards on Auditing, the financial statements of Additional Financing of Vietnam Medium Cities Development Project - Phu Ly City Sub-project (hereinafter referred to as the "Project") for the period from 01 January 2021 to 31 December 2021 and issued the independent auditor's thereon dated 20 May 2022 expressing an unqualified opinion on those financial statements. In connection with the audit of the Financial statements, we also performed procedures on the Project's compliance with the Financing Agreement No. 6070-VN and Financing Agreement No. 6071-VN, laws and regulations that could have a direct and material financial effect on the Project's Financial statements for the period from 01 January 2021 to 31 December 2021 (hereinafter referred to as "Requirements"). Responsibilities of the Project Management Unit The Project Management Unit is responsible for complying with the Financing Agreement No. 6070-VN and Financing Agreement No. 6071-VN, laws and regulations applicable to the Project. Our Independence and Quality Control We have complied with the independence and other ethical requirements of the Code of Ethics for Professional Accountants issued by the International Ethics Standards Boards for Accountants, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentially, and professional behavior. We apply International Standard on Quality Control 1 and accordingly maintain a comprehensive system of quality control including documented policies and procedures regarding compliance and ethical requirements, professional standards and applicable legal and regulatory requirements. Auditor's Responsibilities Our responsibility is to express an opinion on Project's compliance based on the evidence we have obtained. We limited our tests of compliance to the requirements, and we did not test compliance with all laws and regulations applicable to the Project. We conducted our reasonable assurance engagement in accordance with International Standard on Assurance Engagements 3000, Assurance Engagements other than Audits and Reviews of Historical Financial Information ("ISAE 3000"), issued by the International Auditing and Assurance Standards Board. That standard requires that we plan and perform this engagement to obtain reasonable assurance about whether, in all material respects, the Project has complied with the requirements. A reasonable assurance engagement in accordance with ISAE 3000 to report on the Project's compliance with the requirements involves performing procedures to obtain evidence about whether the Project's activities are free of material noncompliance with the requirements, including obtaining an understanding of the internal control relevant to the Project's compliance with the requirements. The procedures selected depends on the auditor's judgement, including the assessment of risks that the Project does not comply with the requirements and whether such noncompliance could have a direct and material financial effect on the Project's financial statements. Our procedures included testing the compliance with the requirements that we consider necessary to provide reasonable assurance that the requirements are compiled by the Project. We believ,qfh the piqgoge we have obtained is sufficient and appropriate to provide a basis for our opinion. 20 A nt ne brofLHY Iritem'aio. nal INDEPENDENT AUDITOR'S ASSURANCE REPORT ON COMPLIANCE (CONT'D) Opinion In our opinion: * The Project has complied, in all material respects, with Financing Agreement No. 6070-VN and Financing Agreement No. 6071-VN, laws and regulations that could have a direct and material financial effect on the Project's financial statements for the period from 01 January 2021 to 31 December 2021; * The Project's receipts and disbursements via the designated account for the period from 01 January 2021 to 31 December 2021 are in accordance with the relevant covenants of Financing Agreement No. 6070-VN and Financing Agreement No- 6071-VN and prevailing relevant regulations established by the World Bank; The withdrawal applications were adequately reconciled to the statements of expenditure (SOEs) prepared by the Project Management Unit for the period from 01 January 2021 to 31 December 2021 and those SCEs were adequately supported; * The proceeds of the loan were used only for the purposes of the Project; * The Project Management Unit has complied with the financial covenants of the Credit Agreement- Other matter Our audit works include assessing the PMU's compliance in the past at a specific point in time- Therefore, our examination does not give an assurance for the future periods because of the risk that the Project's requirements may change or the degree of compliance with the requirements may deteriorate. UHY AUDITING AND CONSULTING AASC AUDITING FIRM COMPANY LIMITED COMPANY LIMITED Nguyen Thi Thu Ha Nguyen Pham Hung Auditor Auditor Auditor's Practici Certificate- Auditors Practicing Certificate No.2277-2018-1 1 -1 No 2893 -2020-002-1 Dao Xuan Dzung Do Manh Cuong Chairman Deputy General Director Auditor's Practicing Certificate Auditors Practicing Certificate No 0284-2018-112-1 No. 0744-2018-002-1 Hanoi, 20 May 2022 21 PART III INDEPENDENT AUDITOR'S ASSURANCE REPORT ON THE INTERNAL CONTROL 22 INDEPENDENT AUDITOR'S ASSURANCE REPORT ON THE INTERNAL CONTROL To: The Project Management Unit Additional Financing of Vietnam Medium Cities Development Project Phu Ly City Sub-project Report on internal control We have audited, in accordance with International Standards on Auditing, the financial statements of Additional Financing of Vietnam Medium Cities Development Project - Phu Ly City Sub-project (hereinafter referred to as the 'Project") for the period from 01 January 2021 to 31 December 2021 and issued the independent auditor's thereon dated 20 May 2022 expressing an unqualified opinion on those financial statements. In connection with our audit of the Projects financial statements, we also examined the effectiveness of internal control over compliance with requirements that could have a direct and material financial effect on the financial statements as well as of internal control over financial reporting, and issue the Independent Auditor's assurance report on internal control. Responsibilities of Project Management Unit As stated in the Statement of the Project Management Unit on page 2, the Project Management Unite is responsible for designing and maintaining effective internal control over compliance with requirements that could have a direct and material financial effect on the financial statements as well as over financial reporting for the purpose of properly preparing and presenting the financial statements so as to minimize errors and frauds; and takes responsibility for its assertions as to the effectiveness of such internal control. Our Independence and Quality Control We have complied with the independence and other ethical requirements of the Code of Ethics for Professional Accountants issued by the International Ethics Standards Boards for Accountants, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentially, and professional behavior. We apply International Standard on Quality Control 1 and accordingly maintain a comprehensive system of quality control including documented policies and procedures regarding compliance and ethical requirements, professional standards and applicable legal and regulatory requirements. Auditors'Responsibility Our responsibility is to express an opinion on the effectiveness of internal control over compliance with requirements that could have a direct and material financial effect on the financial statements as well as internal control over financial reporting based on our examination. We conducted our reasonable assurance engagement in accordance with International Standard on Assurance Engagements 3000, Assurance Engagements other than Audits and Reviews of Historical Financial Information ("ISAE 3000"), issued by the International Auditing and Assurance Board. That standard requires that we plan and perform this engagement to obtain reasonable assurance about whether, in aU material respects, the management has maintained effective internal control over compliance with the requirements that could have a direct and material financial effect on the financial statements as well as internal control over financial reporting. Our examination included obtaining an understanding of internal control over compliance with requirements that could have a direct and material financial effect on the financial statements as well as of internal control over financial reporting, testing and evaluating the design and operating effectiveness of the internal control, and performing such other procedures as we considered necessary in the circumstances to obtain sufficient appropriate evidence on which to base our opinion. Because of inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of control, material misstatements due to crror or fraud may occur and not to be detected. Also, projections of any evaluation of the effectiveness of internal control over financial reporting to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We believe that our audit provides a reasonable basis for our opinion. F I IoI , I2 23 rvie !Ytb !r e,7ijFior w1 INDEPENDENT AUDITOR'S ASSURANCE REPORT ON THE INTERNAL CONTROL (CONTINUED) Opinion In our opinion, the Project Management Unit has maintained, in all material respects, effective internal control over compliance with requirements that could have a direct and material financial effects on the Project's financial statements preparation as well as the internal control system over the Project's financial statements preparation for the period from 01 January 2021 to 31 December 2021. UHY AUDITING AND CONSULT NG AASC AUDITING FIRM COMPANY LIMITED COMPANY LIMITED Nguyen Thi Thu Ha Nguyen Pham Hung Auditor Auditor Auditors Practicini Certificate Auditors Practicing Certificate No.2277-2018 1 -1 No, 2893 -2020-002-1 Dao Xuan Dzung Do Manh Cuong Chairman Deputy General Director Auditors Practicing Certificate Auditor's Practicing Certificate No. 0284-2018-112-1 No. 0744-2018-002-1 Hanoi, 20 May 2022 24