Ministry of Education and Sports Department of Pre-School and Primary Education Early Childhood Education Project ("ECEP") Financial Statements and Independent Auditors' Report Year ended 30 September 2016 Early Childhood Education Project (ECEP) Credit No. 5370-LA, Grant No. H910-LA Contents Page Project information Statement of management' s responsibilities 2 Independent Auditors' Report 3-4 Statement of cash receipts and payments 5 Statement of designated bank account 6 Notes to the financial statements 7-14 Budget and actual payments (Appendix) 15-17 J _J ..J _J _J _J /_ Project Information Project Early Childhood Education Project ("ECEP") IDA Credit No. 5370-LA, IDA Grant No. H910-LA Funding Agencies International Development Association ("IDA") Duration 3 1 July 2014to 3 1 July2019 Project Director Ms. Khampaseuth Kitignavong (Deputy Director General, Department of Pre-school and Primary Education) Registered Office Ministry of Education and Sports Lane Xang A venue Vientiane Capital, Lao PDR Auditors KPMG Lao Co., Ltd. J J Lao People's Democratic Republic Peace Independence Democracy Unity Prosperity Ministry of Education and Sport Department of Pre-primary and Primary Education Statement of Management's Responsibilities It is the responsibility of management to prepare financial statements of the Early Childhood Education Project ("the Project") for the year ended 30 September 2016, which are prepared, in all material respect, in accordance with the accounting policies as described in Note 2 to the financial statements. In preparing these financial statements, management is required to: • Select suitable accounting policies and apply them consistently; • Make judgments and estimates that are reasonable and prudent; • Maintain financial records and prepare the financial statements based on the accounting policies as described in Note 2 to the financial statements; and • Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Project will continue its operations. Project Management of Early Childhood Education Project is responsible for keeping proper accounting records, which disclose with reasonable accuracy, at any time, the financial position of the Project. Members of project management have a general responsibility for taking such steps as are reasonably available to them to safeguard the assets of the Project and to prevent and detect fraud and other irregularities. Project Management confirms that the Project has complied with the above requirements in preparing the financial statements. am Director General Department of Pre-School and Primary Education ' J Ministry of Education and Sports, Lao PDR Date: 31 March 2017 Date: 31 March 2017 1 J _J J KPMG Lao Co.. Lid . a Company licensed under the Foreign In vestment Law of Lno PDR. is a member of K.PMG International, n Swiss coo perauve 2 _J _J KPMG Lao Co.,Ltd. u~~'1 mliM:iJJ~6').,;:i "1"1n'1 0. C"l. 3rd_ 4th Floor, 37 K.P. Tower :; ~1J (I) 3-4, 37 C1:11 te1WU1"1;:J(;:J 23 Singha Road, Ban Phonexay, 'tl~uU1J 23 ~~Ul"l, U"11J1W1Jt~. Saysettha District, P.O. Box 6978 b.Us~'c~b~'1't"\"1, '1 'IJ U.u. 6978, Vientiane Capital, Lao PDR u~risuw;:i~;:iJ~«ru, ~uu 6\l"l;:J Tel +856 (21) 454240-7 1ui : +856 (21) 454240-7 Independent Auditors' Report To the Project Management, Early Childhood Education Project We have audited the accompanying financial statements of the Early Childhood Education Project ("ECEP" or "the Project"), which comprise the statement of cash receipts and payments for the year ended 30 September 2016, the statement of the designated bank account for the year then ended, and notes, comprising of a summary of significant accounting policies and other explanatory information from page 7 to 14. The financial statements have been prepared by management based on the accounting policies as described in Note 2. Management's Responsibility for the Financial Statements Project Management is responsible for the preparation of these financial statements in accordance with the accounting policies as described in Note 2, 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. Auditors' responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity's preparation of the financial statements 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 entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We 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 of the Project for the year ended 30 September 2016 J are prepared, in all material respects, in accordance with the accounting policies as described in Note 2. K PM G Lao Co .. Ltd. n Company li censed under the Foreign In vestment Law of Lao PDR, is n member of K.PMG International. a Swiss cooperative 3 _J _J ..J Basis of Accounting and Restriction on Use Without modifying our opinion, we draw attention to Note 2 to the financial statements, which describes the basis of accounting. The financial statements are prepared to provide information to the Project Management of Early Childhood Education Project to report to the donor JOA . As a result, the financial statements may not be suitable for another purpose. Our repo1 t is intended solely for the Project management and the donor IDA and should not be used by paities other than the Project management and the donor IDA. Date: 31 March 201 7 J j KPMG Lao Co., Ltd . n Compru1y licensed under the Foreign ln\'estment Law of Lao PDR, is a member of KPMG lnternntionnl, n Swiss coopernti rn 4 J ..J ..J Ministry of Education and Sport Department Pre-school and Primary Education Early Childhood Education Project (ECEP) Statement of cash receipts and payments For the year and period ended 30 September 31July2014 to 30 September 30 September 2016 2015 Note USD USD Receipts 3 4,615,848 4,809,880 Payments Improving access to early childhood education in target districts 4 2,684,896 1,978,463 Improving quality of early childhood education services 5 1,700,252 954,749 Project management, Capacity development and monitoring and evaluation 6 450,766 286,050 Total Payment 4,835,914 3,219,262 Exchange gain/loss (2,806) 3,417 Total payments 4,833,108 3,222,679 Excess ofreceipts over payments (217,260) 1,587,201 Fund balance at the beginning of the period 1,5 87,201 Fund balance at the end of the period 1,369,941 1,587,201 1,104,561 482,640 1,587,201 :....; Ms. Khamp ·l"i.i.J:r '""' Director General ector General Department of Pre-School and Primary Finance Department Education Ministry of Education and Sports, Lao PDR Ministry of Education and Sports, Lao PDR J Date: 31 March 2017 Date: 31 March 201 7 J J 5 _j _J Ministry of Education and Sport Department Pre-school and Primary Education Early Childhood Education Project (ECEP) Statement of designated bank account For the year and period ended 30 September 31July2014 to 30 September 30 September 2016 2015 Note USD USD Receipts 3 4,615,848 4,809,880 Payments Payments made out of project's accounts (4,835 ,9 14) (3 ,2 19,262) Decrease/(Increase) of cash at project's operating accounts 7 398,844 (899,756) Increase of cash on hand 7 (994) Increase in advance 8 (82,659) (482,640) Exchange gain/loss 2,806 {3,4172 c 4,516,9232 c4,606,0692 Excess of receipts over payments 98,925 203,811 Fund balance at the beginning of the period 203,811 Fund balance at the end of the period 302,736 203,811 Represented by Cash at designated bank account 7 302,736 203,811 Ms. Khampaseuth Kitignavong Director General Department of Pre-School and Primary Education Ministry of Education and Sports, Lao PDR Date: 31 March 2017 Date: 3 1 March 20 17 ._J 6 1 .J Ministry of Education and Sport Department Pre-school and Primary Education Early Childhood Education Project (ECEP) Notes to the financial statements For the year and period ended 30 September 1. Principal activities The objective of the Project is to increase the coverage and improve the quality of early childhood education ("ECE") services for three (3) to five (5) year-olds in Target Districts. The project wi ll support the following three components: Component 1 will focus on increasing coverage through: (i) the provision of construction grants and training to participating villages for the construction of pre-primary classrooms using Community Based Contracting ("CBC"); and (ii) Estab li shment of Community Chi ld Development Groups ("CCDGs") for 3 and 4 year olds. Component 2 will focus on improving the quality ofECE services through: (i) a supporting services package, technical assistance and training; and (ii) Teacher and education officer training. Component 3 will focus on strengthening project management, capacity development, and monitoring and evaluation at all levels of early childhood ed ucation. 2. Summary of significant accounting policies The following significant accounting policies have been adopted by the project in the preparation of these financial statements: (a) Basis of financial statements preparation The fi nancial statements of the Project, which are expressed in United States Dollars ("USO"), have been prepared in accordance with the cash modified basis of accounting. The accounting policies have been applied consistently throughout the year. (b) Fixed assets All purchases of fixed assets are recorded as payments in the statement of cash receipts and payments upon acquisition. The Project maintains a Fixed Assets Register for control purposes. (c) Cash Cash comprises cash on hand and balances with banks. 7 J _J Ministry of Education and Sport Department Pre-school and Primary Education Early Childhood Education Project (ECEP) Notes to the financial statements For the year and period ended 30 September 2. Summary of significant accounting policies (continued) (d) Foreign exchange The Project maintains its accounting records in USD in accordance with the financial agreement. All cash is held in USD. Transactions in currencies other than USD during the period have been translated into USD at rates approximating those ruling at the transaction dates. All exchange differences are recorded in the statement of cash receipts and payments. (e) Accounting reporting period The financial accounting year of Government of Lao PDR starts on I October and ends on 30 September. During the current year, Government of Lao PDR announced a new financial accounting year starts on I January and ends on 31 December which is effective for fiscal years beginning on or after I January 2017. (f) Comparison of budget and actual payments The approved budget is developed on the same accounting basis, same classification basis and for the same period as for the financial statements. (g) Receipt recognition Fund receipt from funding agencies and administered by IDA is recognised as receipt when cash is credited to the project's designated account. The IDA may make direct payments, at the Project's request, directly to a third party for eligible expenditures. (h) Payments recognition Payments incurred in the frame work of the Financing Agreement are recognised on the cash basis of accounting, i.e. when the payments are made. J _J 8 I _J Ministry of Education and Sport Department Pre-school and Primary Education Early Childhood Education Project (ECEP) Notes to the financial statements For the year and period ended 30 September 2. Summary of significant accounting policies (continued) (h) Early Childhood Education Project categories of payments The three components in the statement of cash receipts and payments are grouped into sub-categories of expenditures under the heading: 1) Goods, works, Consultants' Services, Non-Consultant services; Training and Incremental Operating Costs for the Project These consist of reasonable cost of goods and non-consulting services required for the day-to-day implementation of the Project, incurred by the Recipient (which expenditures would not have been incurred absent the project), including consumable materials and supplies, commun ications services (postage, telephone and internet), media and printing services, translation and interpretation services, office space rental and utilities, leasing and/or routine repair and maintenance of vehicles, equipment, facilities and office premises, fuel costs, bank and insurance charges required for the project, administrative support staff, and Project staff travel , lodging and per diems, but exclud ing salaries (including bonuses, fee and honoraria or equivalent payments) of officials of the recipient's civi l service. 2) Community Child Development Group ("CCDG ") Grants A Community Child Development Group Grants in Kip made or to be made avai lable by the Receipt through the relevant Provincial Education and Sports Services out of the proceeds of the Financing to a Village Education Development Committees ("VEDC") to finance, in part, the reasonable cost of goods, works and services required for the carrying out of the corresponding CCDG sub-project.. 3) National School Meals Program Grants ("NSMP ") These consist of Grants to a National School Meals Program Grant in Kip made or to be made avai lable by the Recipient to finance, in part, the reasonable cost of food expenditures, cooking utensils and incentive for cooks required for the carrying out of the corresponding National School Meals Program Sub-project. 4) Construction Grants These consist of grant in Kip made or to be made available by the Recipient through the relevant Provincial Education and Sports Services office out of the proceeds of the Grant to a VEDC to finance, in part, the reasonable cost of goods, works and services required for the carrying out of the corresponding Construction sub-proj ect. (i) Advances Advances, for activities such as workshops, conferences, monitoring trips, are reimbursable to the Project until expensed by the Implementing Agencies ("IA"). Advances are recognized as expenditure after the advance has been liquidated and the expenses reports are approved. Advances are requested by IA from the Project through formal advance request forms. J 9 _J J Ministry of Education and Sport Department Pre-school and Primary Education Early Childhood Education Project (ECEP) Notes to the financial statements For the year and period ended 30 September 3. Receipts 31 July 2014 to 30 September 30 September Reference 2016 2015 No: Description USD USD Funds transferred on 12 November 500,000 RVNo.014 2 15,753 2015 Funds transferred on 04 December 1,000,000 RVNo.015 193,629 2015 Funds transferred on 16 December 55,242 RVNo.016 869,915 2015 Funds transferred on 13 January 49,630 RVNo.017 511,643 2016 Funds transferred on 12 February 750,825 RV No.018 289,163 20 16 Funds transferred on 24 February 75,492 RVNo.019 369,046 2016 RV No.020 Funds transferred on 04 March 2016 72,359 128,254 RV No.021 Funds transferred on 05 April 20 16 363, I 96 880,I 16 RV No.022 Funds transferred on 26 May 2016 808,3 I 7 500,000 RV No.023 Funds transferred on 15 June 20 I 6 164,044 106,660 RV No.024 Funds transferred on 17 June 20 I 6 388,071 142,306 Funds transferred on 09 August 490,9 15 RV No.025 180,858 2016 Funds transferred on 05 September 130,440 RVNo.026 I 89,854 20 16 4,615,848 4,809,880 J ..J 10 J J Ministry of Education and Sport Department Pre-school and Primary Education Early Childhood Education Project (ECEP) Notes to the financial statements For the year and period ended 30 September 4. Improving access to early childhood education in target districts by activity 30 September 31July2014 to 2016 30 September USO 2015 USO Consultant services 369,178 340,725 Training and workshops 195,857 73,264 Incremental operating cost 367,053 23 1,2 13 Goods 27, 156 959,244 645,202 Construction grants in Provinces Savannakhet 596,768 359,536 Saravane 333,639 242,435 Attapeu 162,736 170,935 Huaphanh 161 ,396 172,978 Champasak 150,605 127,037 Borkeo 95,199 89,455 Oudomxay 47,629 67,620 Sekong 103,265 I ,547,972 1,333,261 Shelters grant in Provinces Borikhamxay 19,743 Huaphanh 64, 165 Oudomxay 69,102 Phongsaly 24,670 177,680 2,684,896 1,978,463 J _J 11 Ministry of Education and Sport Department Pre-school and Primary Education Early Childhood Education Project (ECEP) Notes to the financial statements For the year and period ended 30 September 5. Improving quality of early childhood education services by activity 30 September 31July201 4 to 2016 30 September USD 2015 USD Consultant services 162,060 49,017 Training and workshops 278, 107 36,533 Incremental operating cost 72,681 9,696 Scholarships 181,648 170,248 694,496 265,494 National School Meals Program ("NSMP") grants in Provinces Huaphanh 490,742 329,944 Phongsaly 203 ,783 137,144 Xayaboury 119,421 83,304 Borikhamxay 98,233 72,630 Oudomxay 93 ,577 66,23 3 1,005,756 689,255 1,700,252 954,749 6. Project management, Capacity development and monitoring and evaluation by activity 30 September 31July2014 to 2016 30 September USD 2015 USD Consultant services 90,043 66,038 Training and workshops 122,637 108,867 Incremental operating cost 224,392 111 , 145 Goods 13 ,694 450,766 286,050 J _J 12 _J Ministry of Education and Sport Department Pre-school and Primary Education Early Childhood Education Project (ECEP) Notes to the financial statements For the year and period ended 30 September 7. Cash on hand and cash at bank 30 September 30 September 2016 2015 USD USD Cash at bank in Provinces Houaphanh 335,626 35 1, 102 Xayaboury 88,962 84,815 Oudomxay 52,47 1 I 15,735 Borikhamxay 4,969 69,698 Phongsaly 4,706 168,969 Savannakhet 67 72 Bokeo 64 5,293 Sekong 58 61 Saravane 53 58 Champasak 38 50 Attapeu 9 102,643 Cash in Provinces 487,023 898,496 Cash at bank in Vientiane Cap ital 13,889 1,260 Cash in operating bank accounts 500,912 899,756 Designated bank account: Bank of Lao 302,736 203,811 Total cash at bank 803,648 1,103,567 Cash on hand 994 994 Total cash on hand and cash at bank 804,642 1,104,561 J ..J ..J 13 ..J ..J Ministry of Education and Sport Department of Pre-school and Primary Education Early Childhood Education Project (ECEP) Notes to the financial statements For the year and period ended 30 September 8. Advance to Implementing agencies 30 September 30 September 2016 2015 USD USD Department of Pre-School and Primary Education 379,272 198,640 ("DPPE") Ministry of Education and Sports Education Sector Development Framework 124,715 180,150 Coord ination Unit ("ECU") Department of Teacher Training and Education 31,367 4,450 ("OTTE") Department of Finance ("DOF"), Ministry of 16,785 7,379 Education and Sport. Research Institute for Educational Science 13 ,158 21,811 ("RIES") Department of education and sports, Savannakhet 2 7,652 Province Department of International Cooperation 38,978 ("DOIC"), Ministry of Planning and Investment. Department of education and sports, Attapeu 8,263 Province Department of Planning ("DOP"), Ministry of 7,214 Education and Sport. Department of education and sports, Houaphanh 5,480 Province Department of education and sports, Oudomxay 2,623 Province Total advance 565,299 482,640 l _J 14 ..J ..J ..J LL L__ L L '---'-- Ministry of Education and Sport Department of Pre-School and Primary Education Early Childhood Education Project (ECEP) Budget and actual payments For the year and period ended 30 September (Appendix) This table represents the use of funds by component and detailed activities, as set out in the Project Appraisal Document ("PAD"), compared with the current budget. (*Project Appraisal Document dated 14 May 2014) Budget* Project Appraisal Actual Variance (Not audited) (Not audited) Document ("PAD") Remaining Project Activities by budget as at Component 30 September Cumulative 30 September Cumulative 30 September Cumulative Cumulative Total budget 30 2016 to date 2016 to date 2016 to date to date September 2016 (USD) (USD) (USD) (USD) (USD) (USD) (%) (USD) (USD) 1 Improving access to early childhood education in target districts Community based contracting ("CBC") for pre-primary 1.1 2,328,080 4,265,624 2,892,354 5,119,176 564,274 853,552 17% 5,000,000 734,376 education classroom construction. Community child development 1.2 groups ("CCDGs") for 3 and 4 356,816 397,735 659,589 812,439 302,773 414,704 51 % 1,000,000 602,265 year-olds Sub-total (note 4) 2,684,896 4,663,359 3,551,943 5,931,615 867,047 1,268,256 21% 6,000,000 1,336,641 2 Improving quality of early childhood education services 2.1 Supporting services package 1,497,735 2,276,440 3,694,522 6,516,919 2,196,787 4,240,479 65% 11,200,000 8,923,560 Training and material 218,436 500,612 57% 2,100,000 1,721,439 2.2 202,517 378,561 420,953 879, 173 development Sub-total (note 5) 1,700,252 2,655,001 4,115,475 7,396,092 2,415,223 4,741,091 64% 13,300,000 10,644,999 15 ' L LL L Ministry of Education and Sport Department of Pre-School and Primary Education Early Childhood Education Project (ECEP) Budget and actual payments For the year and period ended 30 September (Appendix) This table represents the use of funds by component and detailed activities, as set out in the Project Appraisal Document ("PAD"), compared with the current budget. _, Budget* Project Appraisal Actual Variance (Not audited) (Not audited) Document ("PAD") Project Activities by Remaining budget as at Component 30 September Cumulative 30 September Cumulative 30 September Cumulative Cumulative Total budget 30 2016 to date 2016 to date 2016 to date to date September 2016 (USD) (USD) (USD) (USD) (USD) (USD) (%) (USD) (USD) 3 Project management, Capacity development and monitoring and evaluation Project Management & 3.1 398,966 677,658 1,709,725 2,578,872 1,310,759 1,901,214 74% 7,300,000 6,622,342 Capacity development 3.2 Monitoring and evaluation 51,800 59,1 58 502,624 734,074 450,824 674,916 92% 1,400,000 1,340,842 Sub-total (note 6) 450,766 736,816 2,212,349 3,312,946 1,761,583 2,576,130 78% 8,700,000 7,963,184 Total Expenditures 4,835,914 8,055,176 9,879,767 16,640,653 5,043,853 8,585,477 52% 28,000,000 19,944,824 Exchange gain/loss (2,806) 611 - - 2,806 (611) 100% - (611) Total 4,833,108 8,055,787 9,879,767 16,640,653 5,046,659 8,584,866 52% 28,000,000 19,944,213 16 " Ministry of Education and Sport Department of Pre-School an d Primary Education Early Childhood Education Project (ECEP) For the year and period ended 30 September Analysis of variances between actual and budget expenditures (Not audited) Most activities were under spent during the period from I October 20 I 5 to 30 September 20 I 6. Component 1: Improving access to early childhood ed ucation in target districts Budget planned for the current year is USO 3,55 1,943 and actual spent for the year is USO 2,684,896 with a variance of USO 867,047 or 24%. There is a variance of USO 867,047. It was planned to procurement for goods such as library boxes and playground equipment but the project could not complete due to the revision of the target number of the project. In addition to this it was planned to have workshop to disseminate the implementation concept of CCDG at four provinces but could not implement. Monitoring the implementation of the CCDG at the village levels but could not start. The unplanned activities will be carried revised based on the restructuring of the project. The unpl anned activities will be carried out in the following year of the Project. Component 2: Improving quality of early childhood education services Budget planned for the current year is USO 4, 115,4 75 and actual spent for the year is USO 1,700,252 with a variance of USO 2,4 I 5,223 or 59%. There is a significant variance of USO 2,4 I 5,223, which was unspent. There were only about 19% of the plan to train on School Lunch Program and teachers. The remain ing plan had been cancelled as the project will have the structuring in order to meet Sustainable Development Goals ("SDG"). Component 3: Project management, Capacity development and monitoring and evaluation Budget planned for the current year is USO 2,2 I 2,349 and actual spent for the year is USO 450,766 with a variance of USO 1,761 ,5 83 or 80%. I ·1 There is a sign ificant variance of USO 1,761 ,5 83. There were 42 activ ities, which had not been implemented due to the Ministry and the World Bank will restructure the project. I ' ......J .J j 17 .J ~