1 I I I I I I I VINH PHUC FOREIGN CONCESSIONAL LOANS PROJECT MANAGEMENT UNIT I VINH PHUC FLOOD RISK AND WATER MANAGEMENT PROJECT Credit Number 8614 - VN AUDITED FINANCIAL STATEMENTS For the period from 25 September 2017 to 31 December 2018 I I I I I I I I I I I I Vinh Phuc Flood Risk and Water Management Project I Credit Number 8614 - VN I I I I CONTENTS Page PART I INDEPENDENT AUDITORS' REPORT ON THE FINANCIAL STATEMENTS Report of the Project Management Unit 3 Independent Auditors' Report on the Financial statements 4-5 Audited Financial statements Statement of Funds and Expenditures 6 Statement of Funds balance 7 Statement of Designated accounts 8 Statement of Withdrawals and reconciliation of funds 9 Notes to the Financial statements 10-13 PART II INDEPENDENT AUDITORS' REPORT ON 14-15 THE INTERNAL CONTROL SYSTEM PART III INDEPENDENT AUDITORS' REPORT ON 16-17 THE COMPLIANCE PART IV MANAGEMENT LETTER 18-20 I I I I I I I 2 I I Vinh Phuc Flood Risk and Water Management Project Credit Number 8614 - VN REPORT OF THE PROJECT MANAGEMENT UNIT Vinh Phuc Foreign Concessional Loans Project Management Unit ("Project Management Unit") presents this report and the Financial Statements of the Vinh Phuc Flood Risk and Water Management Project ("the Project") for the period from 25 September 2017 to 31 December 2018. The Project The Project is implemented under the Credit Number 8614 - VN dated 31 March 2017 ("the Agreement") between the Government of the Socialist Republic of Vietnam and the World Bank. 1 The Project Management Unit Members of the Project Management Unit in the year and to the reporting date are: Mr. Nguyen Duc Tai Head of the PMU Mr. Ho Quang Phuc Deputy Director Mrs. Nguyen Thi Thu Trang Accountant in charge Mrs. Khong Thi Mai Huong General Administrator in charge Auditors I The auditors of AASC Limited have taken the audit of financial statements of the Project. Responsibilities of the Project Management Unit The Project Management Unit is responsible for preparing the project financial statements, including Statement of Funds and Expenditures, Statement of Funds balance, Statement of Designated Accounts and Statement of Withdrawals and reconciliation of funds, which comply with the accounting policies described in the attached Notes to the Financial Statements. The Project Management Unit assures that the accounting policies are appropriately selected and consistently applied. The Project Management Unit assures that the accounting records were fully maintained to prepare the financial statements in accordance with the applied accounting policies and to disclose, with reasonable accuracy at any time, the financial position of the Project. The Project Management Unit is also responsible for maintaining an effective internal control as management determines necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and comply with relevant laws, regulations and other provisions of the funding agreement that could have a direct and material financial effect on the Project financial statements. On behalf of the Project Management Unit Nguyen,Duc Tai Head of the PMU Vinh Phuc, 31 May 2019 I I I 3 I I I No.: 310519.002/BCTC.FIS2 I INDEPENDENT AUDITORS' REPORTS ON THE FINANCIAL STATEMENTS 3 To: Vinh Phuc Foreign Concessional Loans Project Management Unit Opinion We have audited the accompanying financial statements of the Vinh Phuc Flood Risk and Water I Management Project ("the Project") which comprise Statement of Funds balance as at 31/12/2018, Statement of Funds and Expenditures, Statement of Designated Accounts, Statement of Withdrawals and reconciliation of funds and Notes to the Financial Statements for the period 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, including the balance of the Designated Account as at 31 December 2018, funds received and expenditures incurred, movements of the Designated Account for the period then ended in accordance with the basis of the principal accounting policies described in the Notes to the Financial Statements and the provisions of the Credit Number 8614 - VN; In addition, with respect to Statements of Expenditure, adequate supporting documents have been fully maintained to support to the replenishment requests submitted to the World Bank. The expenditures are eligible and in right purposes of the Credit Number 8614 - VN. I Basis of 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 Management Unit in accordance with the international Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants ("IESBA Code"), and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of Management for the Financial Statements The Project Management Unit is responsible for the preparation of the financial statements in accordance with the principal accounting policies described in Notes to the Financial Statements, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, 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 management either intends to cease operations, or has no realistic alternative but to do so. Auditor's Responsibilities for the Audit of the Financial Statements 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 A member of International HANG KiM TOAN AASC 4 I I I I 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, but not for the purpose of expressing an opinion on the effectiveness of the Project's internal control; Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management; Conclude on the appropriateness of management'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 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 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. 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. AASC Limited Do Manh Cuong Nguyen Pham Hung Deputy General Director Auditor in-charge CPA Registered No.: 0744-2018-002-1 CPA Registered No.: 2893-2015-002-1 Hanoi, 31 May 2019 I I * 5 I I Vinh Phuc Flood Risk and Water Management Project Financial Statements Credit Number 8614 - VN Period ended 31 December 2018 STATEMENT OF FUNDS AND EXPENDITURES For the period from 25 September 2017 to 31 December 2018 Accumulated Note to 31/12/2018 VND I. Funds 1 Funds received from the World Bank 3 133,984,873,618 2 Counterpart funds of Vietnam Government 55,247,235,341 3 Exchange rate differences 701,277,395 189,933,386,354 II. Expenditures 4 1 Goods, Consultants' services, Non-consulting services, 50,178,356,741 Training and Workshops 2 Front-end Fee 8,415,750,000 3 Commitment Charge 12,699,123,618 4 Incremental operating costs 2,600,000,000 5 Others 417,406,000 74,310,636,359 Ill. Surplus 115,622,749,995 I I I I I I I I I I * 6 I I Vinh Phuc Flood Risk and Water Management Project Financial Statements Credit Number 8614 - VN Period ended 31 December 2018 STATEMENT OF FUNDS BALANCE As at 31 December 2018 3 Note 31/12/2018 VND CURRENT ASSETS 117,494,632,543 Cash at bank 5 90,055,791,543 Advances to contractors 6 27,438,841,000 NON-CURRENT ASSETS 74,310,636,359 Project Implementation Expenditures 4 74,310,636,359 TOTAL ASSETS 191,805,268,902 CURRENT LIABILITIES 1,871,882,548 Payables to contractors 7 1,871,812,950 Other payables 69,598 FUNDS 189,933,386,354 Project Implememtation Funds 189,232,108,959 - Funds received from the World Bank 3 133,984,873,618 - Counterpart funds of Vietnam Government 55,247,235,341 Foreign exchange differences 701,277,395 3 TOTAL RESOURCES 191,805,268,902 I I I I I I I I 7 I I Vinh Phuc Flood Risk and Water Management Project Financial Statements Credit Number 8614 - VN Period ended 31 December 2018 STATEMENT OF DESIGNATED ACCOUNT For the period: from 25/09/2017 to 31/12/2018 Account holder Vinh Phuc Foreign Concessional Loans Project Management Unit Account No: 0515196666699 Bank: Military Commercial Joint Stock Bank - Dien Bien Phu Branch Address No. 28A, Dien Bien Phu Street, Ba Dinh, Hanoi Credit No.: 8614-VN PART A: ACTIVITIES Note USD USD Opening balance Add: Amounts deposited by the World Bank 5,000,000.00 Deduct: Amounts withdrawn (1,015,055.00) 3 Closing balance 3,984,945.00 PART B: RECONCILIATION 1 1. Amount advanced by the World Bank 5,000,000.00 2. Present outstanding amount advanced to 5,000,000.00 3. Closing balance 3,984,945.00 4. Add: - Amounts withdrawn and not yet claimed 1,015,054.42 - Payment adjustment 0.58 1,015,055.00 5. Total advances accounted for 5,000,000.00 I U I I I I I * 8 I I Vinh Phuc Flood Risk and Water Management Project Financial Statements Credit Number 8614 - VN Period ended 31 December 2018 STATEMENT OF WITHDRAWALS AND RECONCILIATION OF FUNDS U Credit Number 8614 - VN For the period from 25 September 2017 to 31 December 2018 Withdrawal applications Amount claimed Amount received No. Date Currency Advance Total Date Amount Variances Note (a) (b) (b-a) Designated account 01/WB/2018 06/06/2018 USD 5,000,000.00 5,000,000.00 22/06/2018 5,000,000.00 3 Total amounts 5,000,000.00 5,000,000.00 5,000,000.00 I I I I KIE I I I I I I 9 I I Vinh Phuc Flood Risk and Water Management Project Financial Statements Credit Number 8614 - VN Period ended 31 December 2018 NOTES TO THE FINANCIAL STATEMENTS For the period from 25 September 2017 to 31 December 2018 1. Background The Vinh Phuc Flood Risk and Water Management Project is implemented under the Credit Number 8614 - VN dated 31 March 2017 (the "Agreement") between the Government of the I Socialist Republic of Vietnam and the World Bank. The main objective of the Project is to strengthen flood risk management capacity and improve wastewater management in the central catchment of Vinh Phuc Province. The Project consists of the following parts: Part 1: Flood Risk Management Part 2: Water Enviroment Management Part 3: Implementation Support, Technical Assistance and Institutional Strengthening The Project officially came into operation since 25 September 2017 and is expected to close on 31 December 2021. The Project is managed by Vinh Phuc Foreign Concessional Loans Project Management Unit, and its office is located at No 38 Nguyen Trai Street, Dong Da Ward, Vinh Yen City, Vinh Phuc, Vietnam. 2. Principal Accounting Policies a. Basis of preparation of the Financial Statements The annual accounting period commences from 1st January and ends at 31st December. The first accounting period from 25 September 2017 to 31 December 2018. The financial statements are prepared in accordance with the requirements of the World Bank and presented in Vietnam Dong (VND), except for the Statement of Designated Accounts and Statement of Withdrawals, which are prepared in United State Dollar (USD). The principal accounting policies are summarized as below: b. Foreign currencies Funds received from the World Bank in the foreign currencies are translated into VND using the exchange rates announced by the Ministry of Finance at the date of receiving the funds or at the date of direct payment made to contractors/suppliers. Transactions in foreign currencies are translated to VND under actual exchange rates of the serving bank on their transaction dates. All exchange differences from these transactions are recorded as "Exchange rate differences" account and presented as "Exchange rate differences" on the Statement of Funds and Expenditures. c. Funds and Expenditures I Funds Funds received from the World Bank are recorded when remittance made into Designated Accounts or direct payment made to contractors/suppliers; Counterpart funds of the Vietnamese Government are recorded when payments are made directly from the Vietnamese Government to contractors/suppliers of the Project or funds are remitted to PMU for settlement of the Project's activities. I 10 I I Vinh Phuc Flood Risk and Water Management Project Financial Statements Credit Number 8614 - VN Period ended 31 December 2018 I Expenditures Expenditures are recorded when they are actually incurred, except for incremental operating costs which are allocated from general incremental operating costs of Vinh Phuc Foreign Concessional Loans Project Management Unit according to the capital ratio plan approved for the year. d. Designated account 1 Designated Account is the deposit account in USD opened at Military Commercial Joint Stock Bank - Dien Bien Phu Branch for the Project's activities. Payments made via Designated Accounts are for eligible expenditures of the Project in accordance with the provisions of the Credit Number 8614 - VN. 3. Funds received from the World Bank Accumulated to 31/12/2018 USD Equivalent to VND Credit Number 8614 - VN Designated account 5,000,000.00 112,870,000,000 Advance 5,000,000.00 112,870,000,000 Capitalization of interest and commitment charges 562,987.80 12,699,123,618 Front-end Fee 375,000.00 8,415,750,000 133,984,873,618 I 4. Expenditures Accumulated to 31/12/2018 Counterpart The World Bank fund (*) Total VND VND VND Goods, Consultants' services, 292,100,600 49,886,256,141 50,178,356,741 Non-consulting services, Training and Workshops Commitment Charge 12,699,123,618 - 12,699,123,618 Front-end Fee 8,415,750,000 - 8,415,750,000 Incremental operating costs - 2,600,000,000 2,600,000,000 Others - 417,406,000 417,406,000 21,406,974,218 52,903,662,141 74,310,636,359 (*) Including VND 39,945,393,300 financed by the counterpart fund arising before the effective date of the Agreement. I I I I Vinh Phuc Flood Risk and Water Management Project Financial Statements Credit Number 8614 - VN Period ended 31 December 2018 Expenditure items are financed as the Credit Number 8614 - VN as follows: Amount of the Loan Allocated (USD) Funded rate (%) Works 91,324,000 85% () Goods, Consultants' services, Non- 49,221,000 100% () consulting services, Training and Workshops Front-end Fee 375,000 100% Commitment Charge 1,200,000 100% Interest on the Loan accrued on or before 7,880,000 100% the last Payment date immediately preceding the Closing Date. Interest Rate Cap or Interest Rate Collar - 100% premium 150,000,000 (*) Inclusive of local taxes 5. Cash at bank 31/12/2018 VND Designated account 89,956,161,947 Current account (VND) 99,629,596 90,055,791,543 3 6. Advances to contractors 31/12/2018 VND Phuong Nam MCS 23,435,150,000 Hydraulic, hydropower Construction and Investment Consultants JSC 2,412,971,000 Construction and Development Consultants Hoang Thinh Vinh Phuc JSC 1,590,720,000 27,438,841,000 1 7. Payables to contractors 31/12/2018 VND Centre for subtainable community development 809,655,000 Construction and Development Consultants JSC 586,034,000 Vinh Phuc institute of Construction planning 142,893,400 Construction quality inspection center 125,506,000 Others 207,724,550 1,871,812,950 12 I I Vinh Phuc Flood Risk and Water Management Project Financial Statements Credit Number 8614 - VN Period ended 31 December 2018 8. Subsequent events There have been no significant events occurring after the reporting date, which would require adjustments or disclosures to be made in the financial statements. 9. Approval of the Financial Statements I The financial statements were approved by Project Management Unit for issuance on 31 May 2019. Nguyen Duc Tai Nguyen Thi Thu Trang Head of the PMU Accountant in charge Hanoi, 31 May 2019 I I I I I I I I I I I * 13 I I I' ,aasc No.: 310519.002/BCTC.FIS2 INDEPENDENT AUDITORS' REPORT ON THE INTERNAL CONTROL SYSTEM To: Vinh Phuc Foreign Concessional Loans Project Management Unit Vinh Phuc Flood Risk and Water Management Project We have audited, in accordance with International Standards on Auditing, the financial statements of the Vinh Phuc Flood Risk and Water Management Project ("the Project") for the period from 25 September 2017 to 31 December 2018 and issued the auditors report thereon dated 31 May 2019 expressing an opinion on those financial statements. In connection with our audit of the 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 the internal control over financial reporting for the period from 25 September 2017 to 31 December 2018. Responsibilities of the Project Management Unit The Project Management Unit is responsible for maintaining an effective internal control over compliance with requirements that could have a direct and material financial effect on the financial statements as well as the internal control over financial reporting. 1 Auditor's Responsibility Our responsibility is to express an opinion on the effectiveness of internal control based on our I examination. Our examination was conducted in accordance with the International Standard on Assurance Engagements (ISAE) 3000 (Revised). 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 an effective 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. Our examination included obtaining an understanding, testing, and evaluating the design and operating effectiveness of the internal control, and performing other procedures as we considered necessary in the circumstances to obtain sufficient appropriate evidence to provide a basis for our opinion. Because of the 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 prevented or detected on a regular basis. In addition, 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 audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 1 I A member of International HANG KIM TOAN AASC 14 I I I I Auditors' opinion In our opinion, the Project has maintained an effective internal control over misstatements that could have a direct and material financial effect on the Project financial statements for the period from 25 September 2017 to 31 December 2018. AASC Limited I Dolulanlh Cuong Nguyen Pham Hu g Deputy General Director Auditor in-charge CPA Registered No.: 0744-2018-002-1 CPA Registered No.: 2893-2015-002-1 Hanoi, 31 May 2019 I I I I I I I I I I 15 I I aasc No.: 310519.002/BCTC.FIS2 INDEPENDENT AUDITORS' REPORT ON THE COMPLIANCE To: Vinh Phuc Foreign Concessional Loans Project Management Unit Vinh Phuc Flood Risk and Water Management Project We have audited, in accordance with the International Standards on Auditing, the financial statements of the Vinh Phuc Flood Risk and Water Management Project ("the Project") for the period from 25 September 2017 to 31 December 2018 and issued the auditors report thereon dated on 31 May 2019 expressing an 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 Credit Number 8614 - VN dated 31 March 2017, law and regulations that have a direct and material effect on the Project's financial statements for the period from 25 September 2017 to 31 December 2018 ("the Requirements"). Responsibilities of the Project Management Unit The Project Management Unit is responsible for complying with the Requirements applicable to the Project. Auditor's Responsibility 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. I We performed our work in accordance with the International Standard on Assurance Engagements (ISAE) 3000 (Revised). 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 complied with the Requirements. An assurance engagement to report on the compliance with the Requirements at the Project involves performing procedures to obtain evidence about whether the Project's activities are free of material non-compliance 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 non-compliance could have a direct and material financial effect on the Project's financial statements. Our procedures included testing the compliance with the Requirements we consider necessary to provide a reasonable assurance that the Requirements are complied by the Project. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis I for our opinion. I I I A member of International HANG KIM TOAN AASC 16 I I I Auditors' opinion In our opinion, the Project has complied with the Requirements that could have a direct and material financial effect on the Project's financial statements for the period from 25 September 2017 to 31 December 2018. AASC Limited I Do 11 nh C uon g Nguyen Pham Hung Deputy General Director Auditor in-charge CPA Registered No.: 0744-2018-002-1 CPA Registered No.: 2893-2015-002-1 Hanoi, 31 May 2019 I I I I I I I I I I I 17 I