■ . ■ ■ ■ ■ ■ ■ ■ ■ ■ : [ HAIPHON·URBANTRANsPOR·DELOPMEN·刪CT I ■ I AUDITEDFINANCIALsT스T꼰쯔쁘TS I ■ I ANDMANAGEMENTㄵrrr1&ER l . 11 ∥ Forthe죤l뜨111쿠Iycarendcd꺅ccmblll른lllr/[[2017 1 . ■ . 2018 -06. 1 9 ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ HANOI, JUNE - 2018 . HAI PHONG URBAN TRANSPORT DEVELOPMENT PROJECT Credit No. 4900 - VN TABLE OF CONTENTS PAGE PART 1: FINANCIAL STATEMENTS REPORT OF THE PROJECT MANAGEMENT UNIT 2 INDEPENDENT AUDITORS'REPORT 3-4 FINANCIAL STATEMENTS Balance sheet 5 Summary of Sources and Uses of funds 6 Expenditures by Funding sources 7-8 Statement of Designated account Reconciliation 9 Statement of Loan withdrawals 10 Notes to the Financial Statements 11-15 PART 11: INDEPENDENT AUDITORS'REPORT ON INTERNAL CONTROL 16 PART III: INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE 17 PART IV: MANAGEMENT LETTER 18-25 , . . . . . . • . . •SECTIONI •FINANCIAL STATEMENTS . . . • . . - . . ．么 ．。〞 • 口 . . . . • . • - . HAI PHONG URBAN TRANSPORT DEVELOPMENT REPORT OF PROJECT MANAGEMENT UNIT PROJECT - Credit No. 4900-VN for the fiscal year ended Deceniber 31, 2017 REPORT OF THE PROJECT MANAGEMENT UNIT The Project Management Unit ("the PMU") of Regional Transport Works of the Department of Transport, assigned by the People's Committee of Hat Phong as Employer Entity for implementing Hai Phong Urban Transport Development Project ("the Project"), hereby presents this report together with the Audited Financial Statements of the Project for the fiscal year ended December 31, 2017. ThePNW The members of the PMU who are in charge of executing the Project during the fiscal year ended December 3 1, 2017 and to the date of this report include: - Mr. Doan Xuan Dan Director (Appointed on May 28, 2018) - Mr. Vu Duy Tung Director (Resigned on May 28, 2018) - Ms. Dao Nguyen Nhung Chief Accountant The PMU's res]2onsibilitv The PMU hereby certifies that the Financial Statements of Hai Phong Urban Transport Development Project, including: the Balance sheet, Summary of Sources and Uses of funds, Expenditures by Funding sources, Statement of Designated account Reconciliation, Statement of Loan withdrawals and Notes to the Financial Statements from page 05 to page 15 as attached hereto for the fiscal year ended December 31, 2017 have been properly drawn up so as to give a true and fair view of the assets, liabilities and resources of the Project as at December 31, 2017 as well as of its incomes and expenditures for the fiscal year ended December 31, 2017, in accordance with the Accounting policies stated in Note No. 3 of the Notes to the Financial Statements and the provisions of the Financing Agreement No. 4900-VN signed on May 31, 2011, Amendments to Financing Agreement dated September 17, 2014 and June 09, 2015 between the Government of the Socialist Republic of Vietnam and International Development Association. In preparing those Financial Statements, the PMU is required to: - Select suitable accounting policies and then apply them consistently; - Make judgments and estimates that are reasonable and prudent; - State whether applicable accounting principles have been followed, subject to any material departures disclosed and explained in the Financial Statements or not; and - Design and maintain 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; take responsibility for its assertions as to the effectiveness of such internal control. The PMU is responsible for ensuring that proper accounting records are kept, which disclose, with reasonable accuracy at any time, the special position of the Project. It is also responsible for safeguarding the assets of the Project and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The PMU confirms that they have complied with the above requirements in preparing the Financial Statements. For and on behalf of, HAI PHONG. URBAN TRANSPORT DEVELOPMENT PROJECT MANAGEMENT UNIT Doan Xuan Dan Director Hai Phong, June 06, 2018 2 COMPANY LIMITED VIET NAM AUDITING AND EVALUATION COMPANY LIMITED INDEPENDENT MEMBER OF LEA GLOBAL sinc e 20 co Specialized in Auditing, Evaluation, Consultancy on Finance, Accounting and Tax No.: Ij,4 -18/BC-TC/I-VAE Hanoi, June 18, 2018 INDEPENDENT AUDITORS' REPORT To: Project Management Unit of Regional Transport Works Opinion We have audited the Financial Statements of Hai Phong Urban Transport Development Project (hereinafter referred to as "the Project"), prepared on June 06, 2018, which comprise: Balance sheet as at December 3 1, 2017, Summary of Sources and Uses of funds, Expenditures by funding sources, Statement of Designated account Reconciliation, Statement of Loan withdrawals for the fiscal year then ended 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 December 3 1, 2017 as well as of the funds received and expenditures of the Project for the fiscal year then ended in accordance with the accounting convention and the accounting policies set out in Note No.2 and Note No.3 of the Notes to the financial statements. - The Financial Statements give a true and fair view of the balance of Designated account as at December 31, 2017 as well as the receipts and expenditures of the Project via Designated account for the year then ended in accordance with relevant covenants of Financing Agreement for the Financing Agreement No. 4900-VN, Amendment to Financing Agreement dated September 17, 2014 and Amendments to Financing Agreement dated June 09, 2015, Project Financial Management Manual and prevailing relevant regulations established by the World Bank. - The withdrawal applications were adequately reconciled to the statements of expenditures (SOEs) prepared by the Project Management Unit for the fiscal year ended December 31, 2017 and those SOEs were adequately supported. 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 the Project in accordance with the ethical requirements that are relevant to our audit of the financial statements, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Emphasis of Matter - Basis of Accounting We draw attention to Note No.2 and Note No.3 of the Notes to the financial statements, which describes the accounting convention and the summary of the significant accounting policies. The financial statements are prepared in accordance with the accounting convention and the accounting policies set out in Note No.2 and Note No.3 of the Notes to the financial statements and the requirements of the World Bank. As a result, the financial statements may not be suitable for another purpose. Our opinion is not modified in respect of this matter. Responsibilities of Project Management Unit for the Financial Statements The Project Management Unit is responsible for the preparation of the financial statements in accordance with the accounting convention and the accounting policies set out in Note No.2 and Note No.3 of the Notes to the financial statements, and for such internal control as the Project Management Unit determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Head Office: 11m Floor Song Do Building Branch: No. 154 Nguyen Huy Tuong Street. No 165. Cau Giay Street Cau Giay District Hanoi Ward 6. Binh Thanh Dsotrict Ho Chi Minh City Tel 024 6267 0491 492493 - Fax 024 6267 0494 Tel: 028 6294 1117 6252 1818 - Fax 028 6294 1119 Website: www.vae.comvn INDEPENDENT AUDITORS' REPORT (continued) In preparing the financial statements, the Project Management Unit 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 Project Management Unit either intends to liquidate the Project or to cease operations, or has no realistic alternative but to do so. Auditors' Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whoie are free from material misstatement, whether due to fraud or error, and to issue an auditors' 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 International Standards on Auditing (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 scepticism 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. Conclude on the appropriateness of the Project Management Unit's use of the going concern basis 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 auditors' 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 auditors' report. However, future events or conditions may cause the Project to cease to continue as a going concern. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates, if any, and related disclosures made by the Project Management Unit. We communicate with the Project Management Unit regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. U Tran Quoc Tuan Nguyen Thi Hong Van General Director Auditor Certificate ofAudit Practice Registration Certificate ofAudit Practice Registration No. 0148-2018-034-1 No. 0946-2018-034-1 For and on behalf of VIETNAM AUDITING AND EVALUATION CO., LTD 4 4 HAI PHONG URBAN TRANSPORT DEVELOPMENT PROJECT FINANCIAL STATEMENTS Credit No.4900 - VN For the fiscal year ended December 31, 2017 BALANCE SHEET As at December 31, 2017 * Unit: VND Notes December 31, 2017 December 31, 2016 A - ASSETS Current assets 671,415,751,176 362,225,501,039 Cash on hand 5.1 14,300,000 84,300,000 Cash in bank, State treasury 5.2 30,932,189,421 22,741,363,668 Other receivables Advances to suppliers 6 640,469,261,755 339,399,837,371 Total assets 671,415,751,176 362,225,501,039 B - LIABILITIES Current liabilities 143,052,695,422 101,236,999,806 Payables to suppliers 7 143,025,267,247 101,133,868,031 Other payables 8 27,428,175 103,131,775 Total liabilities 143,052,695,422 101,236,999,806 NET ASSETS (A - B) 528,363,055,754 260,988,501,233 NET EQUITY Excess of Income over expenditures 528,363,055,754 260,988,501,233 TOTAL NET EQUITY 528,363,055,754 260,988,501,233 Hai Phong, June 06, 2018 PROJECT MANAGEMENT UNIT OF REGIONAL TRANSPORT WORKS Prepared by Chief Accountant Director Tran Thi Le Thu Dao Nguyen Nhung Doan Xuan Dan 5 U W HAI PHONG URBAN TRANSPORT DEVELOPMENT PROJEC FINANCIAL STATEMENTS Credit No.4900 - VN For the fiscal year ended December 31, 2017 * SUMMARY OF SOURCES AND USES OF FUNDS The year 2017 Unit: VND Accumulated to The year 2017 Accumulated to December 31, 2016 December 31, 2017 Income Credit fund from IDA 1,819,285,804,967 356,951,594,229 2,176,237,399,196 Counterpart fund 1,223,186,432,400 598,730,928,651 1,821,917,361,051 Exchange rate differences 18,730,471,047 6,676,059,700 25,406,530,747 Total 3,061,202,708,414 962,358,582,580 4,023,561,290,994 Expenditures Civil works 1,564,659,106,817 436,973,554,191 2,001,632,661,008 Goods 61,396,437,970 4,209,075,000 65,605,512,970 Training 1,881,882,189 43,210,000 1,925,092,189 Operating costs 19,918,687,367 1,930,520,635 21,849,208,002 Land acquisition 863,915,050,244 210,508,823,856 1,074,423,874,100 Consultancy service and other expenses 288,443,042,594 41,318,844,377 329,761,886,971 Total 2,800,214,207,181 694,984,028,059 3,495,198,235,240 Excess of Income over expenditures Opening balance - 260,988,501,233 Ending balance 260,988,501,233 528,363,055,754 528,363,055,754 Hai Phong, June 06, 2018 PROJECT MANAGEMENT UNIT OF REGIONAL TRANSPORT WORKS Prepared by Chief Accountant Director Tran Thi Le Thu Dao Nguyen Nhung Doan Xuan Dan U6 WWWWW ES EUUgagognggUgU ean.as HAI PHONG URBAN TRANSPORT DEVELOPMENT PROJECT FINANCIAL STATEMENTS Credit No.4900 - VN For the fiscal year ended December 31, 2017 EXPENDITURES BY FUNDING SOURCES The year 2017 Unit: VND L Details of expenses under items Civil works Goods Training Operating costs Land acquisition Consultancy Total service and other expenses Accumulated to December 31, 2016 1,564,659,106,817 61,396,437,970 1,881,882,189 19,918,687,367 863,915,050,244 288,443,042,594 2,800,214,207,181 1. Credit fund from IDA 1,393,335,372,723 61,396,437,970 1,881,882,189 157,959,000 - 246,671,316,390 1,703,442,968,272 2. Counterpart fund 171,323,734,094 - - 19,760,728,367 863,915,050,244 41,771,726,204 1,096,771,238,909 The year 2017 436,973,554,191 4,209,075,000 43,210,000 1,930,520,635 210,508,823,856 41,318,844,377 694,984,028,059 1. Credit fund from IDA 435,082,037,369 4,209,075,000 43,210,000 - 38,072,446,502 477,406,768,871 2. Counterpart fund 1,891,516,822 - 1,930,520,635 210,508,823,856 3,246,397,875 217,577,259,188 Accumulated to December 31, 2017 2,001,632,661,008 65,605,512,970 1,925,092,189 21,849,208,002 1,074,423,874,100 329,761,886,971 3,495,198,235,240 1. Credit fund from IDA 1,828,417,410,092 65,605,512,970 1,925,092,189 157,959,000 - 284,743,762,892 2,180,849,737,143 2. Counterpart fund 173,215,250,916 - - 21,691,249,002 1,074,423,874,100 45,018,124,079 1,314,348,498,097 7 г� _ и � Е'� ^� 'V 00 � О И t� 00 !t д' О� � ai W N � �-ч N О� О оО N О � � ,�,� ,� [� оо оо оо оо о; й[� оо `" О `�^ •"� N � N О � N N � д�' О ",� � fi w � Е '� � � о � о �� r ос''о о � � v� г д к F N v с� о� д� и � оо м С C�i t й й о м й � г� � vi о v�" '� О а � о о о, о, � о, оо ро р, , � .а оо � о tio � cv v �-' м � И 1 д .� N м си ,s Z 8 U � а„ д zd ед , • G� с� , С ev cv о еи N er v о � Е.,, � � z С U'п °v� д°- о м м � � о�� д G� �, �.. -' �д �о о оо � � rn cov '� ° С � � ы� N й г �� N �t t� � и � � � С � г„� � � а� � �� �, и °_ м о�о v о о � о, v �-- L т С+ и � Q� д� И и 01 д� �Г � U� G� � С � � � R N О � l� h О� о0 .-+ ;,г; '', сС � � � �D �О �D �О г�ц '� � О са �., � � о� rn о и и � �� о � � �^ �,,, и и о оо оо v� � о � р� С о о о о о � � � д � � °м° N .�-� � омо й c�v � и es а� �t t� г� оо оо ev и t� Е., � О Е"+ О .и-� �D и N N � о°� И W а г� а И м И и О оо � О 1� � М М ~ ~ М М W � v а � ,.., ,_.. � � � � и _ z �' U ,� r°i � о М�� й й rn � о�, � оо и �с � м cv о � � Q а" � о�Oо rn й й й й м оио й Е" i.�. С С � et �р [� N О� N t� �О О U Q �'с's 0. ,-. м t� •-� м г� с� t� й W � о �д rn и и � r ... и v h � � °д„ „ г� о о� м и с� � г� о � � С � о �л �л й оо � tO м N г,х р'� V,а А �°о� ° о � v с� c�v� й м Q+ � д r� � .-� м � �-= С � W � s а � z � С С � � N � С � � А ` � д z °° Z � . � W �' � ° с°с � � Е" \- V А W � о � � z � � � ■ й � � W � U ti о о. � а Н z � � а � О С и „С W С "-i '��" .С � 'е � � А °я. с°� N ,b, � � � � � � Е � О U м м ._.._ i„ ь. а°"i Р--. � � L z ^о а д а �- `,� F, М � _ �¢ � �д и � s� � � А i-~-+ ич F�I н � � z у +°+ �' Я � .с'., ++ �' [". � Г � г.�. ^С3 � �.ч � оо � � � � �"� � � � 'о � � z °` ° ° � �" � � �' ° ,� �' �; = о z 'са � :v С �' :� С ° :о Я � х �, а й;: о �°�' о � °�.' о � Q� L1 в U С) Е U U в U U х L U С г- c�i --� cv --� cv � HAI PHONG URBAN TRANSPORT DEVELOPMENT PROJECT FINANCIAL STATEMENTS Credit No.4900 - VN For thefiscalyear ended Deceniher 31, 2017 STATEMENT OF DESIGNATED ACCOUNT RECONCILIATION The year 2017 For the period: From January 01, 2017 to December 31, 2017 Account No.: 10924717886688 Depository Bank: Vietnam Technological and Commercial Joint Stock Bank - Hai Phong Branch Address: No.5 Ly Tu Trong, Hong Bang district, Hai Phong city, Vietnam Credit No.: 4900 - VN Currency: USD Total Part A - Account transaction Opening balance 874,442.42 Add.- - Total amount deposited by the World Bank for the period 16,027,425.47 - Bank interests - Amount refunded for unreasonable expenses Less: - Amount withdrawn 15,634,781.47 - Bank charge - Amount refunded to the World Bank Closing balance (December 31, 2017) 1,267,086.42 Part B - Account reconciliation Amount advanced to Designated Account as at January 01, 2017 5,137,596.53 Add: Total amount advanced by the World Bankfor the period 2,862,403.47 Less: Total amount recovered by the World Bank Outstanding amount advanced to Designated Account as at December 31, 2017 8,000,000.00 Closing balance of Designated Account as at December 31, 2017 1,267,086.42 Add: Amounts withdrawn but not yet claimed 6,732,913.58 Total advances to Designated Account as at December 31, 2017 8,000,000.00 Hai Phong, June 06, 2 018 PROJECT MANAGEMENT UNIT OF REGIONAL TRANSPORT WORKS Prepared by Chief Accountant Director Z_ ni Tran Thi Le Thu Dao Nguyen Nhung Doan Xuan Dan 9 � и � q ! I � � ° � � I z �, � ' W с, I ; ^� н о � . � ; ' � "' •� Z Н � � �� � д 'O •'� • 1 и � .�. � .-, ,-, ■ � � �� �� � � а q „ N � °� � 3 �1 � U '� aoi � ° `�°„ и ° а Е� z°' а' ~ N °O о�о � о Э � z � w_ (1 о�о �O и оо Р, г� >, А м� I " й � и r �' � � � � с `ti о � � � � �о Е-� � А ■ �' ^' '� ° .,7 � о д" М ch N N +1; �� Сб � ,� �а� оо .-� д- `� � г �' � � �С z�. о N c�v °v °и N � s. � а о и .-. .-+ с, ° oi� �^а са � � � � � � г� А � 'п �У �. w � • с �� �i � � 0 � о � � � �, � +� с°и с°v ° Z ■ � А о о о Е�., Г/1 й [ i Z � N О N (га ■ � М � И N р W � GO \О И (,�j ■ � �' О� 00 О Z �.АГу „б � � оо и й Q о � � `'�C,i" Н N oNO о ( �'' �• м [-Э � Cr д= � F � й U . � [� i � ,.� � '� �+ О � р�' � О � � а Соб о 00 1 00 �, о ■ � � с М °° �D а'�i � N а о Z О �, •� � � N � `� .� й s� ° � ''� � � � � � � � � i � � Н �I й,� � � л о -cs ;� Z b � а; о Z � � N о� �( � � �-о V сс � � � и и •v �р А � '� � а� rn о` �r � �r =о с� М И N � ■ W �+ о�>^ � О� �Г i N О U '�� Е Е"� � � й � � О I � z � � V � О v i Н р � •О � � � � � '� � � о � � ; � , ц � • г�, � аа• j � .д ¢ z '� � ¢ � 3 � W о 3 � � � о � _. � � -� � � о � b 3 � '� 3 о � � �, W � � о1 й � � •� � о А о о N� м � � � � л ��у Н � � � Ol М I� I О� +--� � о 'а '� у О N м °� r � -С о � � �7 �. � и м � ti � ,.о � s. ---� s7 � Z V м •�t м � � к � � 3 � � ;L�� ',., а � F г� г� , с� о � • о Г� � .� .-� '' Z а� о о о •° о :� �'', Е-� . Q z � � � � � � � � �> 3 о А о о � ¢ еС ¢ ' �, оо оо ' .•-� � � • � С7 а°. ^в .� � N � М а �. � �.:. Z �' � Н О � = д�"„ и и � Z � � о о а х 3 о `" � Z U U U о ■ � � 1 , z � HAI PHONG URBAN TRANSPORT DEVELOPMENT PROJECT FINANCIAL STATEMENTS Credit No. 4900-VN For the fiscal year ended December 31, 2017 NOTES TO THE FINANCIAL STATEMENTS (These notes are an integral part of and should be read in conjunction with the accompanying Financial Statements) 1. Overview of the Project Hai Phong Urban Transport Development Project (hereinafter referred to as "the Project") operates on Financing Agreement No. 4900-VN dated May 31, 2011, Amendment to Financing Agreement dated September 17, 2014 and June 09, 2015 between the Government of the Socialist Republic of Vietnam and International Development Association. The amount of Grant Agreement is represented by 112,100,000 Special Drawing Rights (SDRs), or USD 276.61 million at the USD/SDR conversion rate ruling on the agreement date, of which USD 175 million and USD 101.61 million are financed by the IDA and the People's Committee of Hai Phong, respectively, specific is: Project budget cost by components Total FDA's % (USD financing financing million) Component A- Urban Main Road Development 263.58 163.93 62.20 Al - Construction of the Bac Son - Nam Hai East-West 161.86 137.58 85.00 Link (1) A2 - Niem I Bridge and Truong Chinh Road 12.41 10.55 85.00 Improvement (1) A3 - Land Acquisition and Resettlement (2) 61.37 - - Compensation 71.75 - - Resettlement 1629 - - (7ess cost recoveryftom land sales) -26.67 - - A4 - Consultant Engineering Services 16.15 15.8 97.84 Internal management costs 11.79 - - Component B - Public Transport Improvement 8.04 6.24 77.61 131 - Technical assistance for a Public Transport 1.76 1.76 100.00 Authority (PTA) B2 - Transformation of Line 2 Bus Services 3.59 2.39 66.80 B3 - Kien An Corridor Improvements 2.69 2.09 77.00 Tam Bac - Kien An Corridor Upgrade 2.09 2.09 100.00 Landplanning 0.31 - - Internal managment costs 0.29 - - Component C - Capacity Building 4.99 4.83 96.79 CI - Integrated planning connect system (PCS) 0.77 0.77 100.00 C2 - Capacity buiding and Human Resource 0.64 0.64 100.00 Development C3 - Project Implementation Support 3.58 3.42 95.30 Project implementation support 3.42 3.42 100.00 Internal managment costs 0.16 - - Total 276.61 175.00 63.27 (1) Under Amendment of Grant Agreement dated September 17, 2014 between the Socialist Republic of Vietnam (SRV) and International Development Association (IDA), the IDA financing for Construction work under Sub-component Al and A2 is revised up from 85% to 100%. (2) Under Amendment of Grant Agreement dated June 09, 2015 between the Socialist Republic of Vietnam (SRV) and International Development Association ("IDA"), civil works under sub-component A3 is added as wholly (100%) financed by the IDA. Objectives of the Project The Project's objectives are to improve urban accessibility and to strengthen capacity for urban transport management and planning in Hai Phong. HAI PHONG URBAN TRANSPORT DEVELOPMENT PROJECT FINANCIAL STATEMENTS Credit No. 4900-VN for the year ended December 31, 2017 NOTES TO THE FINANCIAL STATEMENTS (continued) (These notes are an integral part of and should be read in conjunction with, the accompanying Financial Statements) Duration of the Project According to the Agreement, the duration of the Project is 6 years, from 2011 to 2016, with the effective date on July 28, 2011 and the closing date by December 31, 2016 and to be extended until August 31, 2018 under the approval announcement of the World Bank for the extension of the Agreement dated December 29, 2016. 2. Accounting convention and accounting period Accounting convention The financial statements are prepared on the modified cash basis of accounting, and accordingly, income is recognized as received and expenditures as incurred. Accounting period The accounting period of the Project begins from January 01 and ends at December 31. 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 Receipts and disbursements denominated in foreign currencies are converted into Vietnam dong (VND) at exchange rates ruling by Vietnam Technological and Commercial Joint Stock Bank - Hai Phong Branch on the transaction date. Non-cash account related transactions in foreign currency are translated into VND using the central rate stated by the State Bank of Vietnam on the transaction date. Assets and liabilities denominated in foreign currencies are converted at the central rate on the Balance Sheet date. All exchange differences from these transactions are recorded into exchange rate different account and presented on the Summary of Sources and Uses of funds. Recognition of funds and expenditures Funds are recognized when received, that is, IDA financing is recognized when remittance is effected into the Designated account and the counterpart fund (from the Government of Vietnam) when payments are made directly to suppliers/vendors of the Project or when such funds are transferred into the PMU's account for its running costs. Expenditures are recognized when incurred, that is, spending items under "Civil works, goods, consultancy services and training" are recognized when the obligation to pay them arises by the amount of work handed over between a contractor and the PMU; Land acquisition expenses and related administration costs are recognized provided that adequate supporting documents are availed of and that compensation money has been paid to affected individuals and entities; Other expenses are recognized when they are incurred. Proceeds from sales of bidding documents Under the Ministry of Finance's Official Letter No.1 5033/BTC-DT dated November 07, 2011, the Project can use proceeds from selling procurement documents to cover printing expenses and bidding related costs and pay for taxes as statutorily regulated. The remaining amount after deduction of these expenses and taxes is paid to the State budget other than recognized as a source of income for the Project. 12 * HAI PHONG URBAN TRANSPORT DEVELOPMENT PROJECT FINANCIAL STATEMENTS Credit No.4900 - VN For the fiscal year ended December 31, 2017 NOTES TO THE FINANCIAL STATEMENTS (continued) (These Notes are an integral part of and should be read in conjunction with the attached Financial Statements) 4. Designated account and interest from Designated account The Designated Account is a deposit account in USD opened at Vietnam Technological and Commercial Joint Stock Bank - Hai Phong Branch for serving the Project's activities. The payment from the Designated Account is performed for the valid expenditures, in accordance with the related regulations of Financing Agreement for the Credit No.4900 - VN and the related regulations of the World Bank. Interests of Designated account are used to cover depository bank charges and considered as a source of income of the State's budget and presented into the item "Other payables" in Balance Sheet. When the Project is completed, the unused interest is returned to the Government of Vietnam. 5. Cash December 31, 2017 December 31,2016 VND VND 5.1. Cash on hand 14,300,000 84,300,000 Cash in VND - Other sources 14,300,000 84,300,000 5.2. Cash in bank, State Treasury 30,932,189,421 22,741,363,668 Vietnam Technological and Commercial Joint Stock Bank - 28,422,771,267 19,396,252,668 Hai Phong Branch Cash in USD 28,422,448,070 19,385,041,761 IDA Designated account 28,414,412,968 19,376,769,585 IDA interest from Designated account 8,035,102 8,272,176 Cash in VND 323,197 11,210,907 Account ofselling procurement documents 323,197 11,210,907 Hai Phong State Treasury 2,509,418,154 3,345,111,000 Cash in VND 2,509,418,154 3,345,111,000 Expens account ofProject Management Unit 493,003,716 1,884,888,000 Temporary account ofholding land acquisition amount 2,016,414,438 1,460,223,000 Total 30,946,489,421 22,825,663,668 6. Advances to suppliers 6tDecember 31, 2017 December 31, 2016 VND VND CDM Smith Inc. - 6,503,342,417 Guangxi Road and Bridge Construction Co., Ltd 41,291,773,211 61,515,807,002 Civil Engineering Construction Corporation No.4 - JSC - 16,826,466,579 Construction Corporation No.1 Joint stock company - Tasco Joint 87,204,229,324 113,976,469,936 Stock Company Joint Venture. Duyen Hai Investment Consultancy JSC 169,000,000 169,000,000 Center for Assessing Construction Quality Conformity 327,000,000 327,000,000 Consultancy Center for Maritime Construction Technology - 824,503,000 Development Hai Phong Construction and Consultancy JSC - 104,100,000 VNC Construction JSC 968,866,625 1,220,153,000 International Investment JSC - 505,612,000 13 HAI PHONG URBAN TRANSPORT DEVELOPMENT PROJECT FINANCIAL STATEMENTS Credit No.4900 - VN For the fiscal year ended December 31, 2017 NOTES TO THE FINANCIAL STATEMENTS (continued) (These Notes are an integral part of and should be read in conjunction with the attached Financial Statements) Center for Land Development of Kien An district 35,111,386,857 27,208,366,405 Center for Land Development of Hai An district 234,602,706,276 55,721,759,868 Management Unit of Project Investment and Construction of An 210,959,480,879 25,315,987,233 Duong ward Center for Land Development of Le Chan district 7,973,971,366 10,839,852,920 An Viet Auditing Limited Company 572,500,000 - Center for Land Development of An Lao district 42,412,500 42,412,500 Center for Land Development of Ngo Quyen district 21,245,934,717 18,299,004,511 Total 640,469,261,755 339,399,837,371 7. Payables to suppliers . PDecember 31, 2017 December 31, 2016 VND VND Joint-venture of Vietnam-Denmark VIDAGIS and Environment- - 1,083,619,900 Natural Reosources Technology Service Consultancy JSC (TECOS) Jiangsu Provincial Transportation Engineering Group Co., Ltd 8,520,835,599 20,189,607,742 Vietnam-Australia Group JSC 6,251,281,000 5,697,828,000 Hai Phong Transport Works JSC 3,310,735,972 3,310,735,972 International Construction and Investment Consultancy JSC 37,137,746 37,137,746 Hai Phong Transport Engineering Association Consultancy JSC 1,369,000 1,369,000 Obrascon Huarte Lain, S.A. - Dat Phuong Joint Stock 90,408,998,424 34,927,658,259 Corporation Joint -Venture Haiphong Public Transport and Communication Construction 392,356,619 392,356,619 and Investment Consultancy JSC. Transport Engineering Design Corporation 629,000 629,000 Thach Dinh Technology and Technical Consultancy JSC 26,429,000 26,429,000 Thang Long Infrastructure Development JSC 197,533,000 197,533,000 Center for Environmental Resereach 26,511,000 26,511,000 Hai Phong Construction Work Design Consultancy JSC 367,169,100 367,169,100) Center for Land Development of Kien An district 307,478,200 340,836,200/ Technical Center for Environmental Natural Resources 132,446,000 132,446,000 Center for Land Development of Hai An district 1,142,950,880 5,495,429,233 Management Unit of Project Investment and Construction of An 9,230,412,620 9,881,011,315 Duong ward Center for Land Development of Le Chan district 153,632,000 207,632,000 Corporation No.319 257,197,000 257,197,000 Green House Architec JSC 113,218,000 113,218,000 PVI Duyen Hai Insurance Company 139 139 Dai Viet Construction Design Consultancy JSC 18,609,000 18,609,000 Hai Phong Military Command 12,403,000 12,403,000 Hai Phong Construction and Design JSC 254,118,000 2,609,500 Thuan Thien Design JSC 29,455,000 29,455,000 Bach Dang Construction and Export-Import JSC 4,372,983,222 6,338,835,512 Sao Viet Installation Construction JSC 2,163,163,200 2,104,857,200 Binh Minh Installation Construction Invsetment Consultancy JSC 454,621,000 1,965,919,000 14 HAI PHONG URBAN TRANSPORT DEVELOPMENT PROJECT FINANCIAL STATEMENTS Credit No.4900 - VN For the fiscal year ended December 31, 2017 NOTES TO THE FINANCIAL STATEMENTS (continued) (These Notes are an integral part of and should be read in conjunction with the attached Financial Statements) International investment joint stock company 137,900,822 Nam Son Trade and Construction Co., Ltd 2,154,796,895 2,154,796,895 Maritime construction technology consultant and development 386,700 center Civil Engineering Construction Corporation No 4 - Joint Stock 10,995,389,988 - Company Center for Land Development of Ngo Quyen district - 2,696,000 Vietnam Auditing and Evaluation Limited Company (VAE) 120,510,422 - Southern Information and Valuation Corporation - Ha Noi 1,000 Branch Hai Phong Trading and Electric construction JSC 1,432,608,699 5,817,332,699 Total 143,025,267,247 101,133,868,031 8. Other payables December 31, 2017 December 31, 2016 VND VND Interest from Designated account - Souces of fund from IDA 8,035,102 8,272,176 Payables from selling bidding documents 5,825,697 81,210,907 Other payables 13,567,376 13,648,692 Total 27,428,175 103,131,775 9. Comparative figures Comparative figures are figures of the Financial Statements for the fiscal year ended December 31, 2016 of Hai Phong Urban Transport Development Project, which were audited by Vietnam Auditing and Evaluation Limited Company - VAE. Hai Phong, June 06, 2018 PROJECT MANAGEMENT UNIT OF REGIONAL TRANSPORT WORKS Prepared by Chief Accountant Director Tran Thi Le Thu Dao Nguyen Nhung Doan Xuan Dan 1 8p * 15 U U U U U U U SECTION II II U INDEPENDENT AUDITORS' REPORT * ON INTERNAL CONTROL II IU II IU U 11 II U IIA COM-NY LIMITED VIET NAM AUDITING AND EVALUATION COMPANY LIMITED INDEPENDENT MEMBER OF LEA GLOBAL S ince 2 0 0 1 Specialized in Auditing, Evaluation, Consultancy on Finance, Accounting and Tax No.: I0.4 -18/BC-TC/I-VAE Hanoi, June 18, 2018 INDEPENDENT AUDITORS' REPORT on internal control To: Project Management Unit of Regional Transport Works We have audited, in accordance with International Standards on Auditing, the Financial Statements of Hai Phong Urban Transport Development Project (hereinafter referred to as "Project") for the fiscal year ended December 31, 2017 and issued the Independent Auditor's Report thereon dated June 18, 2018 expressing an unmodified opinion on those Financial Statements. In connection with our audit of the Project's Financial Statements, we also examined the effectiveness of internal control system 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. As stated in the Statement of the Project Management Unit on page 2, the Project Management Unit 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 minimise errors and frauds; and take responsibility for its assertions as to the effectiveness of such internal control. 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. Our examination was conducted in accordance with International Standard on Assurance Engagements (ISAE) 3000. That standard requires that we comply with ethical requirements and plan and perform our procedures to obtain reasonable assurance about whether, in all material respects, the Project 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 controls, material misstatements due to error or fraud may occur and not to be detected. Also, projections of any evaluation of the effectiveness of the 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 the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. In our opinion, the Project Management Unit has maintained, in all material respects, effective internal control over com liance with requirements that could have a direct and material financial effect on the Project's financi statements as well as over financial reporting for the year ended December 31, 2017. U Tran Quoc Tuan Nguyen Thi Hong Van General Director Auditor Certicate ofAudit Practice Registration Certificate ofAudit Practice Registration No.: 0148-2018-034-1 No.: 0946-2018-034-1 For and on behalf of VIETNAM AUDITING AND EVALUATION CO., LTD Head Office: 11 Foor Song Do Building Branch: No 15/4 Nguyen Huy Tuong Street No 165 Cau G&ay Street Cau Giay District. Hanoi Ward 6 Binh Thanh District Ho Chi Minh City Tel: 024 6267 0491 492/493 - Fax 024 6267 0494 16 Tel 028 6294 1117 6252 1818 - Fax 028 6294 1119 Website: www.vae.comi.vn . 驪 驪 . . . 目 • . .SE吃TIONlll 總 一INDEPENDENT AUDITORS& REPORT 口口 .ONCOMPLIANCE . . 口 - . . •f ／〔 ．抓。 邑M •中 •文 . 細 • . . 他 . . - . . 1, i LIMITED VIET NAM AUDITING AND EVALUATION COMPANY LIMITED %fir= INDEPENDENT MEMBER OF LEA GLOBAL Specialized in Auditing, Evaluation, Consultancy on Finance, Accounting and Tax No.: W-18IBC-TCII-VAE Hanoi, June 18,2018 INDEPENDENT AUDITORS'REPORT on compliance To: Project Management Unit of Regional Transport Works We have audited, in accordance with International Standards on Auditing, the Financial Statements of Hai Phong Urban Transport Development Project (hereinafter referred to as the "Project") for the fiscal year en ded December 3 1, 2017 and issued Independent Auditors' Report thereon dated June 18, 2018, expressing an unmodified 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.4900 - VN signed on May 31, 2011, Amendments of Financing Agreement dated September 17, 2014 and June 09, 2015, laws and regulations that could have a direct and material financial effect on the Project's financial statements for the fiscal year ended December 31, 2017 (the "requirements"). Project Management Unit is responsible for complying with requirements. Our responsibility is to express an opinion on the Project's compliance with the requirements based on our procedures. 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 performed our work in accordance with International Standard on Assurance Engagements (ISAE) 3000. That standard requires that we comply with ethical requirements and plan and perform our procedures to obtain reasonable assurance about whether, in all material respects, the Project has cornpl led with the requirements. An assurance engagement to report on the compliance with the requirements at the Project involves performing procedures to obtain evidences 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 depend on the auditors' judgment, 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 complied by the Project. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. In our opinion, the Project has complied, in all material respects, with Financing Agreement No.4900- VN signed on May 31, 2011, Amendments to Financing Agreement dated September 17, 2014 and June 09, 2015, laws and regulations that Could have a direct and material financial effect on the Project's firrancial state ents for the fiscal year ended December 3 1, 2017. ,anc,itd state ents lor the ,sea, y, Tran Quoc Tuan Nguyen Thi Hong Van General Director Auditor Certificate ofAudit Practice Registration Certfcate ofAudit Practice Registration No. 0148-2018-034-1 No. 0946-2018-034-1 For and on beha fof VIETNAM AUDITING AND EVALUATION CO., LTD Head Office: 11- Floor Song Da Binding Branch: No 15 4 Nguyen Huy Tuong Street, No. 165 Cau Giav Street. Can G!ay Dauer Hanoi Ward 6. Binh Thant District. Ho Chi Minh City -el 024. 6267 0491 492,493 Fax: 024 6267 0494 Tel 028 6294 1117 6252 1818 Fax 328 6294 1119 Website: www.vae.conri 17