Islamic Republic of Afghanistan Supreme Audit Office AUDIT REPORT FY 1397 (2018) P120398 TF-099074 On-Farm Water Management Project Decmbe Islamic Republic of Afghanistan Supreme Audit Office Reference Number- Date. / Auditor General's Report To His Excellency, Minister of Finance, Government of Islamic Republic of Afghanistan Report on the Audit of the Financial Statements Opinion We have audited the accompanying Statements of Cash Receipts and Payments (the "Financial Statements") of On Farm Water Management Project bearing World Bank Project ID Number P120398 financed under Grant Numbers TF-099074-AF & 96991 (hereinafter referred to as "Project") for the financial year ended 30 Qaws 1397 (2 1 December 2018), which comprise the summary of significant accounting policies and other explanatory notes forming part of the financial statements. In our opinion, the accompanying financial statements present fairly, in all material respects, the cash receipts and payments of the Project for the financial year ended 30 Qaws 1397 (21 December 2018) in accordance with Cash Basis IPSAS (International Public Sector Accounting Standard) - "Financial Reporting under the Cash Basis of Accounting" and comply with the terms and conditions of Project's Grant/ or Financing Agreement. Basis for Opinion We conducted our audit in accordance with International Standards of Supreme Audit Institutions ("ISSAls"). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit ofthe Financial Statements section of our report. We are the Supreme Audit Institution (SAI) of Islamic Republic of Afghanistan and independently derive our legal mandate from the Supreme Audit Office Law and in accordance with the Code of Ethics implemented by the SAO) based on the ISSAI 130- Code of Ethics together with the ethical requirements that are relevant to our audit of the financial statements in Afghanistan and applicable to SAO auditors including external experts for the audit, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics of SAO. We believe that the audit evidence e have obtained is sufficient and appropriate to provide a basis for our opinion. Page l of 3 Responsibilities of Ministry of Finance for the Financial Statements The Ministry of Finance (tihe Ministry) is responsible for the preparation and fair presentation of the project financial statements in accordance with International Public Sector Accounting Standards "Financial Reporting under the Cash Basis of Accounting" and for such internal control as the Ministry determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error and selecting and applying appropriate accounting policies. The Ministry is also responsible for ensuring that activities and fImancial transactions and information reflected in the Financial Statements are in compliance with the project's Grant/ or Financing Agreement. Those charged with governance of the Ministry are responsible for overseeing the project's financial reporting process. 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 mn isstatement, 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 ISSAls 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 ISSA s, 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. * 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. * Evaluate the financial transactions and information reflected in the Financial Statements and whether they are in compliance with the terms and conditions of Project's Grant/ or Financing Agreements. We communicate with those charged with governance of the Ministry 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. We also provide those charged with governance of the Ministry with a statement that we have complied with relevant ethical requirementy regarding independence, and to commUnicate with Page 2 of 3 them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. Report on Other Requirements Management Letter highlighting the areas of improvement in financial management including the compliance with covenants of the Grant/ Financing Agreements and results of its operations for the financial year ended 30 Qaws 1397 (21 December 201 8) has been attached to this report. These observations and recommendation have been communicated to and discussed with project imanagement and intended to improve internal control and results in other operating efficiencies of the Project. Moharn nad Nai Haqmal Auditor 'e al Supreme Audit Office Page 3 of 3 Islamic Republie of Afghanistan On-Farm Water Management Project (World Bank Reference: Project ID P120398; Grant ID TF 96991 & 99074) Financial Statements for the year ended 30th qaws 1397 (21st December, 2018) On-Farm Water Mananement Project World Bank Reference: Project ID P120398; Grant ID 96991 & 99074 STATEMENT OF CASH RECEIPTS AND PAYMENTS FOR THE YEAR ENDED 30 QAWS 1397 (21 DECEMBER 2018) 1397 1396 Cumulative Receipts/ Receipts/ To Date Payments Payments Controlled by Controlled by entity entity USD USD USD RECEIPTS Initial Advance - 4,900,000 Replenishments 15,179,167 13,294,069 57,163,454 Tax collected to be transferred (71) (9,885) 8,275 Farmers contribution 38,563 38,563 TOTAL RECEIPTS 15,217,659 13,284,184 62,110,292 PAYMENTS Disbursement Category: Goods and Consultants' Servcies for Project except for Parts A2 and A3; Training and Incremental Operating Costs 14,016,799 13,428,122 58,642,795 Goods and Consultants' Servcies for Project for Parts A2 and A3 . - - Project Preparation Advance (Expenses) - 399,265 Refund to Donor - - 161,242 Bank Charges 100 125 1,100 TOTAL PAYMENTS 14,016,899 13,428,247 59,204,402 Excess of Receipits over Payments 1,200,760 (144,063) 2,905,889 Taminat (Net) 331,480 570,330 1,396,420 Increase/(Decrease) in Cash & Cash Equivalents 1,532,240 426,267 4,302,309 Cash and Cash Equivalents at the beginning of the year 2,770,069 2,343,802 Increase/(Decrease) in Cash 1,532,240 426,267 Cash and Cash Equivalents at the end of the year 4,302,309 2,770,069 The accompanying notes f an integral part of this financial sta ent Za d Hamd rd D putyMinis er for Fi ce minstry of Fi anc slami ublic of Afghanistan ated:D e er 8, 201 On-Farm Water Management Project World Bank Reference: Project ID P120398; Grant ID TF 96991 & 99074 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 QAWS 1397 (21 DECEMBER 2018) 1) LEGAL STATUS AND ACTIVITY a) The On-Farm Water Management Project was set up in March 2011. The project's objective is to improve agriculture productivity in the project areas by enhancing the efficiency of water used. b) The project was initially financed by the project preparatory grant from the Afghanistan Reconstruction Trust Fund bearing number 96991 in the amount of US Dollars 1,000,000. Later, in March 2016, additional funds were provided in form of grant from the same trust fund bearing number 99074 hereby increasing the funding for the project to US Dollars 41,000,000. In May 2013, an amount of US Dollars 16,000,000 was cancelled by the donor pursuant to restructuring of the project. In 2016, the financing agreement was amended to increase the original amount of the grant from USD 41,000,000 to USD 86,000,000 resulting in net total financing of USD 70,000,000 for the project. An amount of USD 16,000,000 was later cancelled. c) The project consists of the following Parts: i) On Farm Water Management, ii) Institutional Strengthening and Capacity Building of MAIL iii) Project Management, Coordination, Monitoring and Evaluation. d) The significant terms and conditions that determine or affect the availability of the funding assistance are primarily the presentation of eligible expenditures to donor within the period as per and in accordance with the financing agreement. e) These financial statements have been prepared in accordance with the requirements of the Grant Agreement signed between the Government of the Islamic Republic of Afghanistan and the International Development Association (acting as the Administrator of the Afghanistan Reconstruction Trust Fund) in March 2011. 2) SIGNIFICANT ACCOUNTING POLICIES a) Basis of Preparation The financial statements are prepared under the historical cost convention and in accordance with Cash Basis IPSAS - Financial Reporting under the Cash Basis of Accounting issued by International Federation of Accountants (IFAC). b) Reporting Entity These financial statements are for the ProjectFeferred to in para 1(a) which is funded by the grant(s) as specified in para 1(b) and encolnpass the operations of the project to the extent funded by those grant(s). c) Payments Payments made from Special Accouna recognised in the financial statements based on the date the cheque is issued and direc rents by World Bank are recognised on the date on which the withdrawal application for th ment is submitted to the World Bank. However, On-Farm Water Mannement Project World Bank Reference: Project ID P120398; Grant ID TF 96991 & 99074 cheques or withdrawal applications that were ultimately rejected by the bank or the World Bank are reversed in the reporting period. d) Currency translations Transactions in currencies other than the reporting currency are translated into US Dollar at the rate of exchange at which the transaction is actually executed. 3) NOTES TO ACCOUNTS a) Receipts These represent grants and farmers contribution received during the period and the amount of taxes collected but not transferred until the end of the financial year. b) Initial Advance Initial advance represents the advance given by the World Bank to open the special account less withdrawal applications approved by the World Bank but not paid to the special account because they were directed toward a reduction in the Initial advance. c) Reporting Currency The reporting currency is US Dollars. Since US Dollars is the principal disbursement currency of the donor, the financial statements are not prepared in the Afghani which is the currency of Afghanistan, d) Bank Charges The Ministry of Finance has negotiated with Da Afghanistan Bank that bank charges will not be charged on the transactions in the US Dollar Special bank account of the grant. Bank Charges may be levied by intermediary banks on deposits into the Special Account and balances returned to the World Bank. e) Comparison of Budget and Actual Amounts The Project, being the reporting entity for the purpose of these financial statements, in its capacity as such does not make its annual approved budget publicly available nor is its budget explicitly available publicly in the compiled approved budget in a manner purposeful to the context of these financial statements. Thus, the requirement of presenting a comparison of budget and actual amounts is not considered contextually applicable. f) Authorisation Date These Financial Statements are authorised by the Deputy Minister for Finance, Ministry of Finance or any official acting on his behalf who has been so authorised to act on the date endorsed on the Statement of Cash Receipts and Payments. g) Appendices The accompanying appendices provide additional iformation and analysis and form an integral part of these notes, except as indicated ot ise. h) Others These Financial Statements are originally pre are WinEnglish and then translated into Dari. In the event of any inconsistency between the Brfgsh and Dari versions, the English version shall be considered to be correct. On-Farm Water Management Project World Bank Reference: Project ID P120398; Grant ID 96991 & 99074 APPENDIX Al SUMMARY OF WITHDRAWAL APPLICATIONS FOR THE YEAR ENDED 30 QAWS 1397 (21 DECEMBER 2018) Description Application Number Amount Amount USD USD 99074: < DA-1 38 7,117,084 DA-1 37 739,539 DA-1 36 3,976,461 DA-1 34 3,346,084 On-Farm Water Manapement Project World Bank Reference: Project ID P120398; Grant ID 96991 & 99074 APPENDIX A2 US Dollar SPECIAL ACCOUNT SUMMARY FOR THE YEAR ENDED 30 QAWS 1397 (21 DECEMBER 2018) Account No: 27409 Depository Bank: Da Afghanistan Bank (DAB) Address: Kabul USD Opening Balance as per Bank Statement 2,770,567 Add: Replenishments 15,179,167 Farmer's Contribution 38,563 Receipts against refunds depoisted in other accounts in last year 101 Total Additions 15,217,831 Deduct: Payment for Project Expenses 13,685,300 Debits for payments charged to other accounts in last year 604 Bank Charges 100 Total Deductions 13,686,004 Closing Balance as per B.S 30 QAWS 1397 (21 DECEMBER 2018) 4,302,394 On-Farm Water Management Project World Bank Reference: Project ID P120398; Grant ID 96991 & 99074 APPENDIX A3 US DOLLAR SPECIAL ACCOUNT RECONCILIATION FOR THE YEAR ENDED 30 QAWS 1397 (21 DECEMBER 2018) Account No: 27409 Depository Bank: Da Afghanistan Bank (DAB) Address: Kabul USD Closing Balance as per bank statement - 30 QAWS 1397 (21 DECEMBER 2018) 4,302,394 Less: Payments debited to other accounts (85) Closing balance as per financial statements - 30 QAWS 1397 (21 DECEMBER 2018) 4,302,309 � � � � f Q гs �- цэ и� У- и цs �i 1 ?i О f? 6�D {�D д"3 fD О ЕТ С � � � О U�4 � U�3 O�i г3 � � D fl � � � � 0~[7 �t(] � � CD � � И .tL1 � ССС � С С� �3 С] i7 [J Gi G� L� О U � � � � � � � � � � Ф G� ц7 С� L;7 �[} ыf7 0 � О� О G4J д��Э ц�Э �. � � Q I ы С7 тt Ф�Р ct li? .. 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