) Office of the Aditr-Gnea of P .Aksa Special Sectors Audit Wing Constitution Avenue Islamabad No.PA/FAP/FG/SSA/F-13/ 1 Dated: 29 -12-2016 To, 1. The Secretary, Economic Affairs Division, Government of Pakistan Pak Secretariat, Block "C", Islamabad 2. The Country Director, World Bank Resident Mission, 20-A, Shahrah-e-Jamhuriat Sector G-5/1, Islamabad Subject: FOREIGN AIDED PROJECTS (FAPs) AUDIT REPORTS Financial Attest Audits of the following FAP Audit Reports has been conducted by this office: SNo Name of Projects Development Partners 1 Governance Support Project-FATA MDTF 2. Institutional Capacity Building Ombudsman IDA 3. Tertiary Education Support Project IDA 4. Second Gen ICT Sec Policy & Legal World Bank 5. Social Safety Net Project IDA 6. Social Safety Net TIA IDA 7. Emergency Recovery Project TDPs of FATA IDA 8. Water Sector Capacity Building Indus-21 IDA 9. Economic Revitalization of KPK and FATA World Bank 2. Certificate/Financial Attest alongwith the Audit Report containing therein the management letter (ML) on the same is attached herewith. The referred is hereby issued simultaneously to the Government (EAD) and to the World Bank Resident Mission Islamabad through EAD. DEPARTMEta Financial Attest Audit Report on the Accounts of FATA Temporarily Displaced Persons Emergency Recovery Project Credit No: 5719-PK Economic Affairs Division For the Financial Year 2015-16 Auditor General of Pakistan Islamabad TABLE OF CONTENTS Abbreviations and Acronyms .............cr o n ym. . I PREFACE ................................................ ........ PART-I .................................................................................. .... ...... PROJECT OVERVIEW......... .................................... AUDITOR'S REPORT TO THE MANAGEMENT (AUDIT OPINION) .. ..............3 ]PART-H1..................I............... ........................................................... 5 COVER LETTER TO THE MANAGEMENT LETTER . ......... ................6 EXECUTIVE SUMMARY .............................................8 MANAGEMENT LETTER ........................ ..................)-9 1. INTRODUCTION.......................... O.......... ........10 2, AUDIT OBJECTIVES.......................... . .....10 3. AUDIT SCOPE AND METHODOLOGY ...................... ........ 10 4. AUDIT FINDINGS AND RECOMMENDATIONS........................ 4. 1 Organization Management ............................... ...... 12 4.2 Sustainability ........ .... ............... ..... .............15 4.3 Overall Assessment ................................. .........- 1 5 5. CONCLUSION.........................6...... ................16 ACKNOWLEDGEMENT. ...................................... ..... 17 Abbreviations and Acronyms AGP Auditor General of Pakistan AGPR Accountant General Pakistan Revenues CWG Child Wellness Grant EAD Economic Affairs Division GOP Government of Pakistan LSG Livelihood Support Grant IDA International Development Association IDF Institutional Development Fund 1IPSAS International Public Sector Accounting Standards ISSAI International Standards of Supreme Audit Institutions MIS Management Information System NOL No Objection Letter OSS One Stop Shop(s) PMU Project Management Unit PSP Payment Service Provider Rs. Rupees SDR Special Drawing Rights USD United States Dollar WB World Bank PREFACE The Auditor-General of Pakistan conducts audits subject to Articles 169 and 170 of the Constitution of the Islamic Republic of Pakistan, 1973 read with Sections 8 and 12 of the Auditor-General's (Functions, Powers and Terms and Conditions of Service) Ordinance, 2001. The audit of "FATA Temporarily Displaced Persons Emergency Recovery Project" under Economic Affairs Division for the financial year 2015-16 funded by the International Development Association (IDA)was carried out accordingly. The Directorate General Audit (Federal Government), Islamabad conducted audit of the "FATA Temporarily Displaced Persons Emergency Recovery Project" in October, 2016 for the period 2015-16 with a view to reporting significant findings to stakeholders. Audit examined the economy, efficiency, and effectiveness aspects of the "FATA Temporarily Displaced Persons Emergency Recovery Project". In addition, audit also assessed, on test check basis, whether the management complied with applicable laws, rules and regulations in managing the "FATA Temporarily Displaced Persons Emergency Recovery Project". The Audit Report indicates specific actions that, if taken, will help the management realize the objectives of the "FATA Temporarily Displaced Persons Emergency Recovery Project". The Report consists of two parts. Part-I contains Auditor's Report (Audit Opinion) and Financial Statements. Part-Il contains Executive Summary, Management Letter and Audit Findings. The Report has been prepared for submission to the International Development Association (IDA) in terms of Credit Number 5719-PK. Dated: 28.12.2016 (MUHAMMAD AJMAL GONDAL) Place: Islamabad DIRECTOR GENERAL iII akistaB Ombuds improvem,ent int( rVice mon0jtoring PART-I JECT OVERVIEW o and i TOR'S REPORT TO THE MANAGEMENT NCIAL STATEMENTS 1i PROJECT OVERVIEW Name of Project: Temporarily Displaced Person Emergency Recovery Project Sponsoring Authority: World Bank (International Development Association) Executing Authority: Economic Affairs Division (EAD) Credit No: 5719-PK Project Cost: SDR 53.400 million Date of effectiveness: 22.12.2015 Date of Completion: 31.08.2018 Date of Approval: 23.09.2015 CreditClosing Date: 31.08.2018 Expenditure upto 30.06.2016: Rs. 23.482 million 2 Brig(R) Shahid Manzoor Programme Manager FATA Temporarily Displaced Persons Emergency Recovery Project Economic Affairs Division Islamabad Auditor's Report on the FATA Temporarily Displaced Persons Emergency Recovery ProjectFinancial Statements We have audited the accompanying financial statements of "FATA Temporarily Displaced Persons Emergency Recovery Project" under Economic Affairs Division (Credit No.5719-PK) that comprises Statement of Receipts and Payments together with the Notes forming part thereof for the year ended 30th June, 2016. Management Responsibility It is the responsibility of the project management to establish and maintain a system of internal controls, and prepare and present the Statement of Receipts and Payments in conformity with the requirements of Cash Basis IPSAS, Financial Reporting under the Cash Basis of Accounting Standard. Auditor's Responsibility The responsibility of the auditor is to express an opinion on the financial statements based on the audit conducted. We conducted our audit in accordance with the International Standards of Supreme Audit Institutions. These standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free of material misstatements. The audit process includes examining, on a test basis, evidence supporting the amounts and disclosures 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. Opinion In our opinion: a) The financial statements present fairly, in all material respects, the cash receipts and payments by the project for the year ended 30"' June, 2016 in accordance with Cash Basis IPSAS, Financial Reporting under the Cash Basis of Accounting Standard. b) The expenditure has been incurred in accordance with the requirements of legal agreeme(1. (MUHAM AD J ALGONDAL) DIRECTOR ERAL Directorate General Audit (Federal Government), Benevolent Fund Building, Zero Point, Islamabad Dated: 28.12.2016 3 [P FATA TEMPORARILY DISPLACED PERSONS EMERGENCY RECOVERY PROJECT CREDIT NO: 5719-PK ECONOMIC AFFAIRS DIVISION FINANCIAL STATEMENTS FOR THE YEAR ENDED 30"' JUNE, 2016 4j ECONOMIC AFFAIRS DIVISION PROJECT MANAGEMENT UNIT - TEMPORARILY DISPLACED PERSON EMERGENCY RECOVERY PROJECT (IDA - 5719) Statement of Financial Position As at June 30, 2016 2015-16 2014-15 Rupees Rupees Assets Current Assets Cash & Bank China Grant Assignment Account 1,009,004,000 World Bank Assignment Account 320,795,647 1,329,799,647 - Equity & Liabilities Equity Accumulated reserves 1,329,799,647 Liabilities 1,329,799,647 - Financial ManaVi ent Specialist profaK-manager TDP ERP TDPERP Ozl L ECONOMIC AFFAIRS DIVISION PROJECT MANAGEMENT UNIT - TEMPORARILY DISPLACED PERSON EMERGENCY RECOVERY PROJECT (IDA - 5719) Statement of Financial Performance For the Period ended on June 30, 2016 2015-16 2014-15 Rupees Rupees Receipts China Grant Receipts 1,032,486,500 World Bank Receipts 320,795,647 1,353,282,147 Less: Expenditures Expenditures from China Grant Grants Payments Livelihood Support Grant 23,140,000 Child Wellness Grant 342,500 Early Recoery Grant - 23,482,500 Expenditures from World Bank Net Surplus/(Deficit) 1,329,799,547 - Financial Wn;ardement Specialist Progran kaager TDPERP TDP ERP face ECONOMIC AFFAIRS DIVISION PROJECT MANAGEMENT UNIT - TEMPORARILY DISPLACED PERSON EMERGENCY RECOVERY PROJECT (IDA - 5719) Statement of Changes in Equity For the Period ended on June 30, 2016 Rupees Balance as on 23 Sept 2015 Net Surplus/(Deficit) for the year 1,329,799,647 Balance as on 30 June 2016 1,329,799,647 - Financial Management Specialist ProS anager TDPERP TDFVRP ECONOMIC AFFAIRS DIVISION PROJECT MANAGEMENT UNIT - TEMPORARILY DISPLACED PERSON EMERGENCY RECOVERY PROJECT (IDA - 5719) Cash Flow Statement For the Period ended on June 30, 2016 2015-16 2014-15 Rupees Rupees Net Surplus/(Deficit) for the year 1,329,799,647 Adjustment for non cash items (NIL) Net Increase in cash and cash equivalent 1,329,799,647 Cash and cash equivalent at begning of the year Cash & cash equivalent at the end of the year 1,329,799,647 - Financial Management Specialist Pr anager TDPERP TD ERP 61o ECONOMIC AFFAIRS DIVISION PROJECT MANAGEMENT UNIT - TEMPORARILY DISPLACED PERSON EMERGENCY RECOVERY PROJECT (IDA - 5719) Notes to the Financial Statements For the Period ended on 30th June 2016 1 Legal Status and Operations Establishment of Project Management Unit (PMU) Temporarily Displaced Person Emergency Recovery Project (TDP ERP) was approved at the time of signing of the Minute of negotiation by Federal Government with World Bank on 31 July 2015. Financing Agreement with World Bank was signed on September 23, 2015. Operations of PMU TDP ERP are governed under approved Operational Manual of the project. 2 Basis of Preparation Financial Statements have been prepared on Cash Basis of Accounting. Receipts are recognized in period when received and expenditure is recorded upon issuance of cheque to Payment service providers agaisnt reimbursement claims. 3 Basis of Preparation 3.1 Basis of Measurement Financial Statements have been prepared on Cash Basis of Accounting. Receipts are recognized in period when received and expenditure is recorded upon issuance of cheque to Payment service providers agaisnt reimbursement claims. 3.2 Functional and Presentation currency Financial Statements have been prepared in Pakistani Rupees (PKR) which is functional currency of this project. 3.3 Statement of Compliance These Financial Statements have been prepared in accordance with international Public Sector Accounting Standards (IPSAS). 4 Types of Grants 4.1 Early Recovery Grant (ERG) A one-time resettlement grant of Rs. 35,000 has already been provided to the families for returning to their homes by FDMA. The grant covers basic transportation and immediate subsistence needs of the families, Expenditure against this grant is recorded to extent of amount reimbursed to Federal Government. 4.2 Livelihood Support Grant (L5G) These are Unconditianal Cash Tranfsers (UCT) amounting to Rs. 4,000 per month, provided to support immediate safety net recovery support for a period of 4 months. These LSGs shall cover basic and subsistence needs of the families after they return to their homes, to ensure consumption smoothing and provision of support for the affected beneficiaries, till they are able to restore their livelihoods. 4.3 Child Weliness Grant (CWG) These are Conditianal Cash Tranfsers (CCT) linked to a comprehensive child wellness package of Rs. 7,500 (in three instalments), to encourage long-term improvements in children's health and support overall human development outcomes for the affected region. 5 Period of Finacial Statements Period of Finacial Statements is from september 23, 2016 till 30th June 2016. Financial Manageerpecialist Progr anager TDP ERP TDP P ff~~~ 4,1rC"