Supreme Audit Office Government of Islamic Republic of Afghanistan INDEPENDENT AUDITORS' REPORT To The President of the Government of Islamic Republic of Afghanistan. Report on the Financial Statements 1. We have audited the accompanying statements of Cash Receipts and Payments (the "Financial Statements") of the " Afghanistan Non Formal Approach to Training, Education and Jobs in Afghanistan Project (NATEJA)" bearing the World Bank/Afghanistan Trust Fund ID number P 146015 (ARTF Grant No. TF 016354) for the financial year ended 30 Qaws of Solar Year 1394 (22 December 2014 to 21 December 2015) of the Ministry Of Labor, Social Affair, Martyrs and Disabled, and a summary of significant account policies and other explanatory notes. The Ministry of Finance's Responsibility for the Financial Statements 2. The Ministry of Finance (the "Ministry") is responsible for preparation and fair presentation of the Financial Statements in accordance with International Pubic Sector Accounting Standard "Financial Reporting under the Cash 8asis. 'of. Accounting." This responsibility includes: designing, implementing and mnainIirin internal control relevant to the preparation and fair presentatio $the of financial statements which are free from material misstatement, whffiei cue to fraud error; selecting and applying appropriate accounting policies, ak i king accoufAting-, estimates that are reasonable in the circumstances. 3. The Ministry's policy is to prepare the accompanying financial statements on cash receipts and payments basis. On this basis revenue is recognized when received rather than when earned, and expenses when paid rather than when incurred. Auditor's Responsibility 4. Our responsibility is to express an opinion on these Financial Statements based on our audit. We conducted our audit in accordance with the International Organisation of Page 1 of 3 Audit Institutions (INTOSAI) standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance on whether the financial statements are free of material misstatement. 5. An audit involves performing procedures to obtain sufficient and appropriate audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making the risk assessments, internal control relevant to the entity's preparation and presentation of financial statements is considered in order to design audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of internal controls. An audit also includes evaluating the appropriateness of accounting policies used, the reasonableness of accounting estimates made by management, as well as evaluating the presentation of the financial statements. 6. We believe that the audit evidence obtained by us is sufficient and appropriate to provide a basis for our opinion. Opinion While conducting Audit of this project we found that the Cash Management need be strengthened The Cash withdrawn from Bank Account to the tune of 400000 AFN not entered in Cash book (Audit Finding No. 1) Cash Book shows negative cash balance to the tune of AFN 271642 (Audit Finding No. 11) Cash Book not maintained properly (Audit Finding No. 111-A, 111-B, Ill-C). The project/staff of project incurred cash expenses from their own sources/pocket and then took the reimbursement from the Project to the tune of'AFN 820539 (Audit Finding No. IV). Audit has already pointed out as above that the Cash Book have not been maintained properly which need to be reviewed(the soft copy), th cash book need to be in hard copy to avoid any change in the cash Book later on. Keping in vici the observations as stated above, in our view, the Financial Statements prese fli4 riy f material respects, cash receipts and payments of "the Afghanistan Non FormaltApproa \ Training, Education and Jobs in Afghanistan Project (NATEJA)" beanrng the Woqd Bank/Afghanistan Trust Fund ID number P 146015 (ARTF Gran No. TF 016354) fo fhe financial year ended 30 Qaws of Solar Year 1394 (22 December 2WJ4$o 21 December 2015) of the Ministry Of Labor, Social Affair, Martyrs and Disabled, for theOepar ended 30 qows of Solar Year 1394 (22 December 2014 to 21 December 2015) in accordoitce with Internatiohal Public Sector Accounting Standard "Financial Reporting under the Cash Basis of Accounting. Report on Compliance The Ministry of Finance's Responsibility for Compliance Page 2 of 3 7. In addition to the responsibility for the preparation and presentation of the financial statements described above, the Ministry of Finance is also responsible for ensuring that the activities, financial transactions and information reflected in the financial statements are in compliance with the following grant agreement (hereinafter referred to as the "Financing Agreement"): Grant Agreement No. TF 016354 dated April11, 2014 entered into between the Islamic Republic of Afghanistan and the International Development Association (acting as administrator of the Afghanistan Reconstruction Trust Fund) for the provision of Fifteen Million USD (USD 15000000) funding to the Project. Auditor's Responsibility on Compliance 8. In addition to the responsibility to express an opinion on the financial statements described above, our responsibility includes expressing an opinion on whether the activities, financial transactions and information reflected in the financial statements are, in all material respects, in compliance with Financing Agreement. This responsibility includes performing procedures to obtain audit evidence about whether all cash payments and receipts are in compliance with the terms and conditions of Financing Agreement.Such procedures include the assessment of the risks of material non-compliance. 9. We believe that the audit evidence obtained by us is sufficient and appropriate to provide a basis for our opinion on compliance. Opinion on Compliance 10. In our opinion, in all material respects, the activities, financial transactions. and information reflected in the financial statements are in compliance with the teo ipd conditions of Financing Agreements. Other Matters - Restriction on Use 11. As indicated above, the statements of cash receipts and payments are prep'ared in accordance with the International Public Sector Accounting Standard "Financial Reporting under the Cash Basis of Accounting" and may not suit another purpose. 12. This report including our opinion is intended solely for the information and use of the President of the Islamic Republic of Afghanistan and the International Development Association and should not be used for any other purpose. We do not accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come. Page 3 of 3 Other Matters - Internal Control Deficiencies 13. During the audit of the financial statements, we noted certain weaknesses in internal controls and other operational matters which have been disclosed to the Ministry in the Management Letter relating to the audit of the Fisc I These observations and recommendations, all of which have been ussed with the Mir try, are intended to improve internal control or result in other erating efficiencies. D oh mad Sharif Sharifi r General of Afghanistan Supreme Audit Office Kabul, Afghanistan May 2016 Page 4 of 3 Islamic Republic of Afghanistan Non-Formal Approach to Training Education and Jobs in Afghanistan Project World Bank Reference: Project ID P146015; Grant ID TF 16354 Financial Statements for the year ended 30th Qaws 1394 (21st December, 2015) Non-Formal Approach to Training Education and Jobs in Afghanistan Project World Bank Reference: Project ID P146015; Grant ID TF 16354 STATEMENT OF CASH RECEIPTS AND PAYMENTS FOR THE YEAR ENDED 30 QAWS 1394 (21 DECEMBER 2015) 1394 1393 Cumulative Receipts/ Receipts/ To Date Payments Payments Controlled Controlled by entity by entity USD USD USD RECEIPTS nihal Advance - 1,000000 1,000,000 Re plenishments 849,345 87,688 937,033 TOTAL RECEIPTS 849,345 1,087,688 1,937,033 PAYMENTS Disbursement Category: Goods, Non-Consultant's Services, Consultant's Services & Training and 1,059,533 443,859 1,503,3 ncremental Operating Costs Inentive Payments Bank Charges 150 75 225 TOTAL PAYMENTS 1,059,683 443,934 1,503,617 ncrease/(Decrease) in Cash & Cash Equivalents (210,338) 643,754 433,416 Cash and Cash Equivalents at the beginning of the year 643,754 icrease/(Decrease) in Cash & Cash Equivalents (210,338)> 643 754 Cash and Cash Equivalents at the end of the year 433,416' 643,75. The accompanying notes form an integral part of this financial statement. M. Mustafa Mastoor Deputy Minister for Finance Ministry of Finance, Islamic Republic of Afg nista Dated: May 25, 2016 Non-Formal Approach to Training Education and Jobs in Afghanistan Project (World Bank Reference: Project ID P146015; Grant ID TF 16354) SIGNIFICANT ACCOUNTING POLICIES & NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 QAWS 1394 (21 DECEMBER 2015) 1) LEGAL STATUS AND ACTIVITY a) The Non-Formal Approach to Training Education and Jobs in Afghanistan Project was set up in April 2014 to increase the potential for employment and higher earnings of targeted young Afghan women and men in rural and semi-urban areas through non-formal skills training. b) The project consists of the following parts: i) Improving the Quality of Non-formal Training and Labor Market Outcomes of Trainees. i) Project Management, Capacity Building of MOLSAMD and M&E. iii) Piloting Entrepreneurship among Unskilled and Illiterate Young Afghans. c) The project is funded by a grant from Afghanistan Reconstruction Trust Fund bearing reference number 16354 in the amount of US$ 15,000,000. d) The significant terms and conditions that determine or affect the availability of the funding assistance are primarily the presentation of eligible expenditures to donor within the period as per and in accordance with the financing agreement. e) These financial statements of the Project have been prepared in accordance with the requirement of the financing agreement signed between the government of the Islamic Republic of Afghanistan and the International Development Association in April 2014. 2) SIGNIFICANT ACCOUNTING POLICIES a) Basis of Preparation The financial statements are prepared under the historical cost conveitor and in accordance with Cash Basis IPSAS - Financial Reporting under the Cash Basis of Accounting issued by International Federation of Accountants (IFAC). b) Receipts These represent grants and aid received during the period. c) Payments Payments made from Special Account are recognised in the financial statements based on the date the cheque is issued and direct payments by World Bank are recognised on the date on which the withdrawal application for the payment is submitted to the World Bank. However, cheques or withdrawal applications that were ultimately rejected by the bank or the World Bank are reversed in the reporting period. 3) NOTES TO THE FINANCIAL STATEMENTS a) Initial Advance Initial advance represents the advance given by the World Bank into the designated account of the project. Non-Formal Approach to Training Education and Jobs in Afghanistan Project (World Bank Reference: Project 10 P146015; Grant ID TF 16354) b) Reporting Currency The reporting currency is US Dollars. Since US Dollars is the principal disbursement currency of the donor, the financial statements are not prepared in the Afghani which is the currency of Afghanistan. c) Currency Translations Transactions in currencies other than the reporting currency are translated into US Dollar at the rate of exchange at which the transaction is actually executed. d) Bank Charges The Ministry of Finance has negotiated with Da Afghanistan Bank that bank charges will not be charged on the transactions in the US Dollar Special bank account of the grant. Bank Charges may be levied by intermediary banks on deposits into the Special Account and balances returned to the World Bank. e) Appendices The accompanying appendices provide additional information and analysis and form an integral part of these notes, except as indicated otherwise. f) Others These Financial Statements are originally prepared in English and then translated into Dar. In the event of any inconsistency between the English and Dari versions, the English version shal be considered to be correct. Non-Formal Approach to Training Education and Jobs in Afghanistan Projec World Bank Reference: Project ID P146015; Grant ID TF 16354 APPENDIX Al SUMMARY OF WITHDRAWAL APPLICATIONS FOR THE YEAR ENDED 30 QAWS 1394 (21 DECEMBER 2015) Application Description Number Initial Advance Amount USD USD DA-A 9 85,628 DA-A 8 147,063 DA-A 7 80,078 DA-A 6 248,810 DA-A 5 99,644 DA-A 4 188,124 Non-Formal Approach to Trainin2 Education and Jobs in Afghanistan Project World Bank Reference: Project ID P146015; Grant ID TF 16354 APPENDIX A2 US Dollar SPECIAL ACCOUNT SUMMARY FOR THE YEAR ENDED 30 QAWS 1394 (21 DECEMBER 2015) Account No: 27539 Depository Bank: Da Afghanistan Bank (DAB) Address: Kabul USD Opening Balance as per Bank Statement 643,74 Add: Replenishments by World Bank 849,3 3 Total Additions 849,345 Deduct: Payment for Project Expenditures 1,059,533 Bank Charges l5 Total Deductions 1,059,683 Closing Balance as per B.S 30 QAWS 1394 (21 DECEMBER 2015) 1 433,416 Non-Formal Approach to Training Education and Jobs in Afghanistan Project World Bank Reference: Project ID P146015; Grant ID TF 16354 APPENDIX A3 US Dollar SPECIAL ACCOUNT RECONCILIATION FOR THE YEAR ENDED 30 QAWS 1394 (21 DECEMBER 2015) Account No: 27539 Depository Bank: Da Afghanistan Bank (DAB) Address: Kabul USD Chosing Balance as per bank statement - 30 QAWS 1394 (21 DECEMBER 2015) 433,416 Closing balance as per financial statements - 30 QAWS 1394 (21 DECEMBER 2015) 433,416 .... . .. .... Non-Formal Approach to Training Education and Jobs in Afa,hanistan Pro ect World Bank Reference: Project ID P146015; Grant ID TIF 16354 Appendix A4 STATEMENT OF GRANT FUNDS AVAILABLE FOR THE YEAR ENDED 30 QAWS 1394 (21 DECEMBER 2015) Amount n currency of commitment Amount of Grant USD 15,000,000 Amount disbursed by World Bank untill the end of 13941 USD 1,937,033 Undisbursed Balance USD 13,062,967 In reporting currency Amount disbursed by World Bank untill the end of 13941 USD 1,937,033 Equivalent US Dollars for undisbursed amount USD 13,062,967 Total estimated amount of Grant Funds available USD 15,000,000 Cumulative Payments as per the Statement of Cash Receipts & Payments USD 1,503,611 1 Actual amounts of total disbursement made by the World Bank as available from Client Connection.