1Idian t AdAccounts Department Office of the Principal Accountant General (E&RSA) Karnataka No. Pr. AG (ERSA)/IAU-I/C/2015-16/2 Date: 30.09.2015 To, The Project Director, Project Implementation Unit, Karnat-ka State Highways Improvement Project (KSHIP)Jt, KLR. Ci-cle, Bangalore - 560 001. Sir, Sub : Report on the Project Financial Statement of Karnataka State Highways Improvement Project - II (KSHIP - II) under IBRD Loan No. 8022-IN and ADB Loan No. 2705-IN for the period ending 2014-15. With reference to the subject above, I am to enclose the Report on the Project Financial Statement of the Karnataka State Highways Improvement -- II (KSHIP - II) under IBRD Loan No. 8022-IN and ADB Loan No. 2,5-IN for the period ending 2014-15. The receipt of the same may please be acknowledged. Yours faithfully, Senior Deputy Accountant General (Economic Sector - I) ifflr wim ar, IWfh4o. 5398 *rqF -560 001 /Audit Bhavan, 4G' Block, Post Box No. 5398, Bengaluru - 560001 Copy to 1, The Additional Chief Secretary to Government, Finance Department, Government of Karnataka, Vidhana Soudha, Bangalore - 560 001. 2. The Controller Accounts Management & Project Monitoring Unit, Department of Finance, 4th Floor, 4th Gate, M.S. Building, Bangalore - 560 001. 3. The Director General (Audit), O/o the Comptroller & Auditor General of India, No. 9, Deen Dayal Upadhyaya Marg, New Delhi - 110 124. 4. The Director General (Reports Central), O/o the Comptroller & Auditor General of India, No. 9, Deen Dayal Upadhyaya Marg, New Delhi - 110 124. Th1 Secretary to Government of India, Department of Expenditure, Ministry of Finance, Plan Finance Division, New Delhi. 6, The Secretary to Government of India, Ministry of Finance, Department of Economic Affairs, Noom No. 34-C, New Delhi. Sr.Au it Officer / IAU - I REPORT OF THE COMPTROLLER AND AUDIT GENERAL OF INDIA To The Project Director, Project Implementation Unit, Karnataka State Highways Improvement Project (KSHIP)-II, K.R. Circle, Bangalore-560001 REPORT ON THE PROJECT FINANACIAL STATEMENT We have audited the accompanying financial statements of Karnataka State Highways Improvement Project-l World Bank Assisted Project Loan No-80221N including Highway Financing Modernization Component being executed through Karnataka State Road Development Corporation Limited which comprises of the Statement of Sources and Applications of Funds and reconciliation of claims to Total Application of Funds for the year ended March 2015 . These statements are the responsibility of the Project's management. Our responsibility is to express an opinion on the accompanying financial statement based on our audit. We conducted our audit in accordance with the Auditing Standards promulgated by the Comptroller and Auditor General of India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. Our audit examines, on a test basis, evidence supporting the amounts and disclosure in the financial statements. It also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements present fairly, in all material respects, the sources and application of funds of Karnataka State Highway Improvement Project-Il for the year ended 31' March 2015 in accordance with Government of India accounting standards. In addition, in our opinion, (a) with respect of Financial Monitoring Reports adequate supporting documentation has been maintained to support claims to the world bank for reimbursement of expenditures incurred, and (b) except for ineligible expenditure as detailed in the memo of disallowances appended to this audit report, expenditure is eligible for financing under the loan/credit Agreement. During the course of audit, statement of Expenditure/ Financial Monitoring Reports and the connected document were examined and these can be relied upon to support reimbursement under the loan / Credit agreements detailed below: in million SI Category Expenditure Eligible Less Expenditure Percentage of Amount No Expenditure inadmissible admissible Reimbursement Reimbursable as per audit 1 Consultants 262,340 233.645 0.671 232.974 80 186.379 Services, training, studies, incremental operating costs, under Part A.1, A.2, C and D of the project 2 Consultants 12.431 12.431 --- 12.431 80 9.945 Services, training, studies, incremental operating costs, under Part B.1, B.2 and B.3 of the project 3 Goods and 1692.297 1597.242 18.820 1578.422 80 1262.738 Works under part A.1, C and Dof the project 4 Goods and 241.422 0 100 Works under part A.2 of the project 5 Goods and 176.769 0 100 Works under part B.2 of the project 6 Front End Fee 0 0 Total 2385.259 1843.318 19.491 1823.827 1459.062 This report is issued without prejudice to Comptroller & Auditor General's right to incorporate the audit observations in the report of C&AG of India for being laid before Parhament /State or Union Territory Legislature. Senior Deputy Accountant Generad (Economic Sector-1) O/o the Accountant General (ERSA) Karnataka, Bangalore MEMO OF DISALLOWANCES World Bank Assisted Project Loan No.80221N 1. A sum of 7762385 in WEP-1 and a sum of Z 11057727 in WEP-IV were paid during 2014-15 to the contractors concerned in order to compensate them for the royalty they had to pay additionally to the Government in respect of the minor mineral materials used by them for the works. The additional royalty had arisen on account of revision of royalty rates by Government of Karnataka with effect from 1.3.2014. These compensatory payments were unwarranted as price adjustment clause was to take care of price fluctuations subsequent to award of contract. In view of this, an expenditure of Z 18820112/-incurred on royalty revision is disallowed. 2. An amount of T 671000 being the salary paid to the incumbents of two posts Viz., Project Executive and Project co-ordinator, is disallowed as these were not among the various posts sanctioned for implementation of KSHIP by the Government. Senior Deputy Accountant Genera Economic Sector-I Annexure 1 Karnataka State Highways Improvement Project - II World Bank Assisted Project - Loan No.8022 IN Statement of Sources & Application of Funds Report for the year ended 31sf March 2015 (Rs. In Millions) Particulars Receipts/Expenditure Project to date For the year Sources of Funds Opening Bank Balance - - Government of Karnataka Funds 1684.248 4480,182 World Bank Funds: PPIAF Grant 0.000 8.973 -Coan Funds 701.010 3511.126 Total Funds 2385.258 8000.281 Uses of Funds Uoad Improvement Works 2069.943 7033.947 Alighwy Financing Modernization Component 189.199 200.367 ad Safety Component 13.134 13.134 Road Sector Policy & Institutional Development 10.237 66.936 remental Operating Costs 48.604 124.745 "ances 54.141 522.109 Z Front End Fee 0.000 39.043 Total Expenditure 2385.258 8000.281 asing Bank Balance - oeputy etary (Finance), KSH{HIPr o ojec ttDc u4ntan aGenerl, (,drt O KHPKSHIP O1rec: of tlhe rat a LC )f VU BANGALORE 0 Ccoulntant General (Audity-ri Date 2 0 MAY 2015 o Kauuk Notes: 1. This Financial Statement is prepared on a cash basis of accounting as per provisions of the Financial Rules and codes applicable 2. The Expenditure figures are based on monthly/quarterly abstract of Tally Software used for project accounts. 3. The receipt of World Bank Loan Funds were accounted based on ACA release from Government of India. 4. Names ofAccounting units whose financial statements are aggregated to prepare the consolidated accounts are: PIU-KSHIP, Bangalore and four Project Divisions namely Tumkur, Shimoga, Raichur and Belgaum. Annexure 2 Karnataka State Highways Improvement Project - II World Bank Assisted Project - Loan No.8022 IN Reconciliation of Claims to Total Applications of Funds Report for the year ended 31st March 2015 Amt Rs. Million) Schedules Previous Project to Current Year Yerdt Year date Bank Funds Claimed (A) IUFR-Application No.19 88-703 IUFR-Application No.20 129.547 IUFR-Application No.21 31.440 IUFR-Application No.22 28.917 IUFR-Application No.23 305.151 IUFR-Application No.24 280.290 IUFR-Application No.25 233.335 IUFR-Application No.26 188.738 UFR-Application No.27 219.974 F3unds Claimed for the year Ref, Schedule I 1506.095, Less: Claims of previous years IUFR 21 31.440 Funds claimed for the current year(A) 1474.655 Total Expenditure made (B) 2385.258 1952.491 8000.281 Expenditure as per books of account 2385.258 1952.491 8000.281 Less: Expenditure Not Claimable (C) Ref: Schedule I 541.940 Expenditure Not Claimed (D) 0 Claimable Expenditure (F) = (B)- (C)-(D) 1843.318 World Bank Share (E) 1474.655 Claims in excess of Expenditure (A-E) 0 C-T Depty ar-Fiane,Ao it 0-T'ct Depu7 ary-Finance, Project Director, KSHIP U PROOee of heA Date: 0 MAY 2015 Date: ~~ ~~KSHIP KradaSneot us BANUALORE Notes: 1. Total expenditure made during they B*b ust be the same as the Total Expenditure shown on the Statement ofSources and Applications o unds. 2. Total Expenditure made during the year (B above) included advances of Rs. 54.141 Million. Karnataka State Highways Improvement Project - II World Bank Assisted Project - Loan No.8022 IN (Rs. In Millions) Disbursement Category and Expenditure for the year ended 31.03.2015 Disbursement Category Expenditure Eligible %Claim Expenditure Amount Consultants' services, training, studies, - Incremental Operating Costs under Parts A.1, A.2, 262.340 233.645 80% 218.355 C, and D of the Project * Consultants' services, training, studies, incremental Operating Costs under Parts B.1, B.2 12.431 12.431 80% 9.944 and B.3 Goods and works under Part A.1, C, and D of the Project 1692.297 1597.242 80% 1277.796 Goods and Works under Part A.2 of the Project 241.422 0 100% 0 cods and Works under Part B.2 of the Project 176,769 -- 0 100% 0 &ront End Fee 0 0 0 Total 2385.259 1843.318 1506.095 Breakup for claim amount: eimbursement claimed during the period (Ref. Schedule - 1) Pending claim amount as of 31.3.2015 642.047 (iUFR Application No.25, 26 & 27) Total 1506.095 Keputy Se ary-Finance, A.KS 11P Project Director, KSHIP VAsq9utadfr al, Date: 20 MA 2 5 Ofice of the Accountant Gencral (Aud. 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