MA BS 82 J Partners (Chjirird Aaouum Independent Atiditors' Report to the General Body of Palli Karnia-Sahayak Foundation (PKSF) We have audited the accompanying financial statements of "Low Income Community l lousing Support Projeet (LIClISP)" implemented by Palli Karma-Sahavak Foundation (PKSF, which coimprise te statement of financial position as at 30 June 2017 and the statement of comnprehensive ineone and the staternent of cash flows for te year then ended and a snmmarv of signiicaiit accounting policics and other explanatory notes. Management's Responsibility for the Financial Statements PKSFs management is responsible for the preparation and fair presentation of these financial statements in accordancek with Bangladesh Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are frec trom material misstatement, whether die to fraud or error. Auditors' Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Bangladesh Standards on Auditing. Thosc standards requirc that we coniply with ethical reqluirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are frec from material iisstatement. An audit involves perförming procedures to obtain audit evidence about the amounis and diselosures in the financial statenents. The procedures seleeted depend on tbe auditors' judgment. ineluding the assessment of Ile risks of material misstatemnent of the financial statements, whether due to frand or error. In making those risk assessments, the auditors consider internal control relevant to the enity's preparation and fair presentation of the financial statements in order to design audit procedures that are avppropriatc in the circumstances, but not for the porpose of expressing an opinion on the efiectiveness of the entity's internal control. An audit also ineludes evaluating the appropriateness of aceounlting policies tsed and the reasonableness of accounting estimates made by management, as well as evauating the overall presentation of the finanlial statements. Wc believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements present fairly, in all material respeets, the financial position of "Low Income Community lousing Support Project (LICIHSP)" implemented by Palli Kanna-Sahayak Foundation (PKSF) as at 30 June 2017 and its financial perfornance and its Cash flows for the year then ended in aceordance with Banglidesh Vinancial Reporting Standards and other applicable laws and regujlations. We also report that: a) Wc lave obtained all the information and explanations whicl to the best of our knowledge and belief were necessary for Ilie purpose of our audit and made de verification thereof; b) In our opinion, proper books of accounts as required by laws have been kept by PKSF so fur as it appeared of those books: and c) The statement of financial position and statement of comprehensive income dealt with by the report agreciment witlh the books ofaccounts. Dated, Dhaka: MAB-, VJ I>&iitners 30 November 2017 Chartej ed Accountants corporato Office: th i ra h e sc : SMiC Tov:er u7th F1oodx QS PwsPt n/t mffi o 33. Banani CA Road 17 s h A~li Yb-~S Ifflaa-121 3, ais i 5 0 ji''iS iiiil 1,ýf nts l->u 8 >ý014 MABSi 'J Parn uers Low Income Community Housing Support Project (LICHSP) Implemented by Palli Karma-Sahayak Foundation (PK!SF) Statement of» Financial Position As at 30 June 2017 As at 30 Junc Notes 2017 ASSETS Taka Non-current assets Loan to partner organ izations (POs) - non current portion 3 29,090,910 29,090,910 Current assets Loan to partner organiizations (POs) - current portion 3 2,909,090 Interest and other receivables 4 5,845,121 Service charge receivables 5 184.493 8,938,704 Total assets 38,029,614 CAPITAL AND LIABILITIES Capital fund and reserve Retained surplus 6 (455,507) (455,507) Current liabilities Current account with PKSF 7 35,872,748 Other Liabilities 8 1,972.373 Loan 1 Loss Provision 9 640.000 38,485,121 Total capital fund and liabilities 38,029,614 Tthe alnexed notes from I to t7 and Annexure A, 13 & form an inlegral part of these tinancia statem Golam Touhid \il. Abdul Karim Deputv Ianaging Director Managing Director Dated, Dhaka: MABS & J Partners 30 November 2017 Chartejed Accountants 2 MABS & Partners Chartered A IO ntat Low Inconie Community flousing Support Projeet (LICIASP) Implemented by Palli Karma-Salayak Foundation (PKSF) Statenent of Comprelensive Income For the year ended 30 June 2017 For the year ended Notes 30 Juie 2017 Taka INCOME Operating income Service eharge 10 184,493 184,493 Non-operating income Girant income l l 5,845,121 5,845,121 Total incone 6,029,614 EXPENDITURE Manpower compensation (Salarics, allowances & others) 12 2,656,250 Institutional Development and capacity Building 13 662,629 Monitoring and Evaluation 14 23,743 Program and Project Cost 15 1,872,373 Administrative expense 16 630,1 26 Loan Loss Provision Expenses 9 640,000 Total expenditure 6,485,121 Excess/(slortage) of income over expenditure (455,507) TC annexed notes from 1 to 17 and Annexure A, B & C form an integral part of these financia s at ii lts. ank. di Kari Deputy Managing Director Managing Dircetor Signed in ternis of ourn separate report annexed. Dated, Diaka: MABS & J Paltners 30 November 2017 Chartered Accountants MA BS & J Partners Shartere A (ountanli' Low Inconie Community lousing Support Project (LICHSP) Implenented by Palli Karna-Sahayal Fouindation (PIKSF) Statement of Cash Flows For the year ended 30 June 2017 For the year ended 30 June 2017 Taka A. Cash tlows from operating activities Excess/(shortage) of inconie over expenditure (455,507) (455,507) Adjustnient for items not involving the movenient of casi Loan loss provision 640,000 640,000 Surplus ehanges in operating activities 184,493 Changes in operating activities (Increase)/Decrease in loan to partner organization -non current portion (29,090,910) (Increase)/Decrease in loan to partner organization -current portion (2,909,090) (Ilcrease)/Decrease in interest others receivable (5,845,121) (I ncrease)/Decrease in service charge receivable (1 84,493) I ncrease/(Decrease) in current account with iKSF 35,872,748 Increase/(Decrease) in others liabilities 1,972,373 (184,493) Net casi inflows/(outflows) fron operating activities B, Cash flows froi investing activities Net cash inilows/ (outflows) fron investing activities _ C. Cash filows from finantcing activities Net cash inflows/(outiflows) from financing activities _ D. Net increase/(decrease) in cash and cash equivalents (A+4-B+C) _ Add: Opening cash and cash equivalents Closing cash and cash equivalents [ nnexed notes fromi I to 17 and Annexure A, B, & C riom an integral part of thse finaneial n aiits olam Mouhid Md. Abdul Kar ni Deputy Managing Dir-etr Managing Director Signed in terms of our separate report annexed. Dated,Dliaka: MJAB$ & J Partners 3(0 November 2017 Charter ed Accountants N xi v maonl M /A S J Partners Chirltivd A,conanimp Low Income Community H4ousing Support Project (LICH0SP) Implemented by Palli Karnm-Saaliyak Foundation (PIKSF) Notes to the Financial Statements For the year ended 30 June 2017 1 Background 1.1 PKISF Palli Karna-Sahayak Foundation (PKSF), an apex development organisation, was established by the Government of Bangladesh (GoB) in May 1990, for sustainable poverty reduction through employment generation. Legally, PKSF is a "company not lor profit" and is registered under the Companies Act of 1913/1994 with the registrar of Joint Stock Companies. The legal structure of PKSF allows flexibility and authority to undertake programmes in a dynamic environment, implementing them throughout the country and manave its affairs as an independent oreanisation. The major objectives of PKSF are to: (a) provide financial assistance and institutional development ,support to appropriate organisations for implementing sustainable inclusive financial programmes for reduction PKSF works with the continuous support of semi-government & government organizations; voluntary agencies & societies; local government bodies; institutions; groups & individuals and will keep on moving forward to achieve its goal. PKSF, over the years, has gained in-depth Understanding and valuable experience on the multi-dimensional aspects of poverty. Adding new dimensions to its mission in 2010, PKSF reshaped its core goal as "establishing human dignity", instead of limiting its efforts towards achieving economic freedom only and started undertaking new programs for altering this goals. PKSF has adopted disaster management and micro insurance programme under the fold of its social protection programmes. The Registered Office of PKSF is situated at "PKSV 13haban", Plot: E-4/B, Agargaon Administrative Area, Sher-e-Bangla Nagar. Dhaka- 1207, Bangladesh. 1.2 Low income Community Housing Support Project (LICIISP) This is The World Bank funded project that aims to pilot a community led approach to low income housing. This approach will provide an integrated package of technical assistance, grants, and housing loans to targeted settlements with a view to improve living conditions and shelter. National I lousing Authority (NHA) and Palli Karma-Sahayak Foundation (PKSF) is jointly implementing this project. It has five components, such as Part-A: Community Mobilization and Planning, Part-B: Urban Community Improvements and Upgrading, Part-C: Shelter Component and Lending Part-D: Monitoring and Evaluation and Learning and Part-F: Project Management, Training, and Capacity Building, NIA will develop the tertiary infriastrUctures i.e. road network, drainage system, water supply system, sewerage system under Component-A, B, D & F., will be implementing in Comilla city corporation & Siraigonj Pourashabha. PKSV will develop shelter lending Under Part-C through its Partner Organizations (POs) in all 5 municipalities (Sirajgonj, Narshingdi, Jessore, Comilla, Rangpur) in the pilot phase. The project duration is 5 years, out of which first 2 years is pilot phase and last 3 years will be roll-out phase. The project will be implemented in 13 selected municipalities. Total budget USD 57.50 million out of which PKSF will spend USDI8.00 million as loans and grants. NiIA will spend the remaining amount of the budget to develop the tertiary infrastructires. 1.3 Major objectives of LICHSP The objective of this project is to improve living conditions in selected low income and informal settlements in designated municipalities in Bangladesh. 5 M JA BS j J aters k?ha tred An nuin t, 2 Significant accounting policies 2.1 Basis of accounting The Programme s LowN income Community I lousing Support Project (LICIISP) financial statements have been prepared under the historical cost convention on a going concern basis using the liternational Financial Reporting Standards (IFRS) and International Accounting Standards (IAS) as adopted in Bnagladesh. Palli Karna-Sahayak Foundation (PKSF) generally follows the accrual basis of accounting or a modified form thereof for key income and expenditure items. The significant accounting policies followed in the preparation and presentation of these financial Service charges Revenue includes the service charges receivable or received from Partner Organizations (POs) during the reporting period for their use of the credit Fund and recognized as and when it becomes due. Service charge against any loan overdue by 60 days is not recognised as income of the relevant year, rather it is kept as olT balance sheet item. Service charge realized against such loan is recognised as income of the year in which it is received. Interest on bank accounts Revenue is recognized as the interest accrues unless collectability is in doubt. Other income All other income are recognized when the right to receive such income has been reasonably determined and all conditions precedent are satisfied. 2.3 Period These financial statements covered the year tiom 01 July 2016 to 30 June 2017. 2.4 Provision for liabilities Provisions for liabilities are recognised when there is a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount can be made, Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. 2.5 Loan loss provision The loan loss provision policy of the PKSF is as tinder: Classification Status Days outstanding Rate Standard (Other than agriCutlture) Nil 2% Standard (Agricult1rC) Nil 5% Watch list (Other than agriculture) 01 -60 days 10% Watch list (Agriculture) 01-60 days 15% Substandard (Other than agriculture) 61-180 days 50% Substandard (AgriculttIre) 61-180 days 60% DoUbtful (All) 181-365 days 80% Bad (All) Over 365 days 100% The loan loss provision policy is however applicable to loans only. 2.6 General a) The financial statements have been prepared in Bangladeshi Taka currency and figures have been rottnded offto the nearest integer. b) This is 1st year's tinancial statement of the Low Income Community Housing Support Project (LICIISP) hence there is no corresponding figures. I its r6 MABS & J Partners As at 30 J une 2017 Taka 3 Loan to PO Under Project - Non Current Protion The above amount represents loan outstanding as at 30 Junie 2017 with partner organizations against loan to (POs) and non-partners (NPOs) . Break down is shown in Annexure-A. The movernent of Loan was as follows Opening Balance Add: Loan disbursed during the year 32,000,000 Less : Loan recovered during the year _ (losing Balance 32,000,000 Maturity- wise break up above anount is given below: Loan to POs under LICHPSP -Non Current Portion 29,090,910 Loan to PO's under LICI HSP> - Current Portion 2,909 09) 32,000,000 4 Interest and Other Receivables Grent receivaible fr expenses- LICHSP 5,845,121 Total 5,845,121 5 Service charge receiv'ables 184,493 The above amount represents service charges receivables from partner organizations and non-partner organizations as on 30 June 2017 against loan to POs and non POs. Break down is shown in Annexure-B. 6 Retained Surplus/(deficit) Opening balance Add : Excess of inconie over expenditure during the year (455,507) Closing balance (455,507) 7 Current account with PKSF This represents the balance in current account maintained with PKSF as at 30 June 2017: PKSF- current account 35,872,748 Total 35,872,748 8 Other Liabilities External audit fee 100,000 Provision for program cost under LICHSP: Thengamara Mohila Sabuj Sangha (TMSS) 395,959 Eco-Social Development Organization (ESDO) 360,066 Ad-din Welfare Centre 359,308 PIDIM Foundation 369,526 National Development Programme ( NDP) 387,514 Total 1,972,373 7 MA BS & J Partners 9 Loan loss provision As per the loan loss provision policy of PKSF, the management m-aiiitains a provision on Ilie outstanding loan amotint at the following rates: I,oa11 amoljut Provisio Classification status Days in arrear Rate (Taka) (Taka) 2017 20171 Standard: POIS Current 2% 32,000,000 640,000 Watch list: POIS 1-60 11110% Substandard: POS 6 1 -180 50% Doubtful: POS 181-365 80% Bad: 1POS Over 365 100% - - Total 32,000,000 640 000 8 MA BS j Partners For the year ended 30 June 2017 Taka 10 Service Charges 184,493 This represents service charges carned during the year from the partner organizations (POs) against loan provided to PO's and Non-PO's. PO wise break-up is shown in Annexure C 1 Grant 11come Grant Income Account under LICHSP 5.845,121 Total 5,845,121 12 MaInpower compensation (Salaries, allowances & others) This consists of the following Project Co-ordinator 630,000 Assistant Project co-ordinator (Construction) 598,500 Assistant Project co-ordinator (Finanec & Accounts) 598,500 Assistant Project co-ordinator (Environment) 503,500 Junior Engineer 213,750 Messenger 1 12,000 Total 2 656,250 13 Institutional Development and capacity Building This consists of the following Tranining,Workshop &Seminar 662,629 662.629 14 Monitoring and Evaluation Monitoring Cost 23,743 Total 23.743 15 lrogram and Project Cost This consists of the following Thengamara Mohila Sabuj Sangha TMSS 395,959 Eco-Social Development Organization (ESDO) 360,066 Ad-din Welfare Centre 359,308 PIlIM Foundation 369, 526 National Development Programnme NDP) 387,514 Total 1,872,73 16 Administrative exienses This consists of the following Printing and Stationary 3.130 Office Rent 30 1,200 Utilities 49,716 Telephone,Mobile& Internet Bill 17,030 Recrnitment Expenses 1 18,008 Necting & Entertainnient Expenses 7,050 External Audit Expenses 100,000 Miscellaneous Expenses 33 992 Total 63012 17 Subseotuerit event No circumistances have arisen since the statement of financial position date, which vould reuuire aditstments to or disclosure in the financial statements or notes thereto. 9 MA BS & J Partners Anunexutire-AS L,ow Ineoie Comimunity lousing Support Project (LICHSP) Implemented by Palli Kara-Sahayak Foundation (PKSF) Partner Organizations (POS) and Non-POs wise break-up of loan outstanlding As at 30 Ju ne 2017 As at 30 June 2017 Takta A. Loan to Partner Organizations under-LICIISP Category-Large l Thengamara Mohila Sabuj Sangha (TMSS) 16,000,000 2 Eco-Social Development Organization (LSDO) 5,000,000 3 Ad-din Welfare Centre 3,500,000 4 PIDIM Foundation 5,000,000 5 National Development Programme ( NDP) 2,500,000 Total 32,000,000 e ia niemaiona M A BS I Partners Anniexure-1 Low Incomie Conimjunity iousiig Sipport Project (LICIISIP) Impleiented by Palli Karma-Salayak Foundation (PKSF) PO and Non-POs wise BIreak-up of the Service Charge Receivable As at 30 June 2017 As at 30 June 2017 Taka A. Accrued Service Charge-LICIISP Category-Large I Thengaiara Mohila Sabuj Sangha (TMSS) 94,685 2 Eco-Social Developinent Organization (ESDO) 36,164 3 Ad-din Welfare Centre 14.192 4 PIDIM Foundation 21,370 5 National Developnent Programme ( NDP) 18,082 Total l84,493 ii I IN ie nL~~r (> MABS &JPrnr Annexure-C Low Incomje Comniy,nity lousing Support Project (LICHSP) Implemented by Palli Karma-Sahayak Foundation (PKSF) Partner Organization (POs) and Non-POs wyise Break-up of Service Charge Recognized As at 30 June 2017 For the year ended 30 June 2017 Taka A. Service Charge under LICIISP Category-Large I TIhenganara Mohila Sabuj Sanglia (TMSS) 94,685 2 Eco-Social Development Organization (LSDO) 36,164 3 Ad-din Welfare Centre 14,192 4 PIDIM Foundation 21,370 5 National Development Programme ( NDP) I 8,082 Total 184,493 12