a4 Islamic Republic of Afghanistan Supreme Audit Office AUDIT REPORT FY 1397 (2018) P112872 H5680 & D0760 Financing Second Customs Reform and Trade Facilitation Deeme 20.9 Islamic Republic of Afghanistan Supreme Audit Office Reference Number: . Date-DVI/ 139[ 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 Second Customs Reform and Trade Facilitation Project bearing World Bank Project ID Number P112872 financed under Grant 11) D0760 (hereinafter referred to as "Project") for the financial year ended 30 Qaws 1397 (21 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 of the 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 w ith tJese requirements and the Code of Ethics of SAO. We believe that the audit evidence v 'hae obtained is sufficient and appropriate to provide a basis for our opinion. Page I of 3 Responsibilities of Ministry of Finance for the Financial Statements The Ministry of Finance (the Ministry) is responsible for the preparation and fair presentation of the Project financial statements in accordance with International Public Sector Accounting Standards "Financial Reporting tinder the Cash Basis of Accounting" and for such internal control as 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 financial 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 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 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 ISSAls, 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,eircumstances, but not for the purpose of expressing an opinion on the effectiv `s ofthe project's internal control. * Evaluate the appropriateness of a ',&ipgf policies used and the reasonableness of accounting estimates and related d' futcu made by management. * Evaluatc the overall presentation, tiQkture and content of the financial statements, including the disclosures, and heth ie financial statement 'represent the underlying transactions and events in a manner that deiieves fair presentation. Page 2 of 3 * Evaluate the financial transactions and information reflected in the Financial Statements and whether they are in compliance with the terms and conditions of the 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 requirements regarding independence, and to communicate with 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 financia year ended on 30 Qaws 1397 (21 December 2018) has been attached to this report. These observations and recommendation have been communicated to and discussed with Project management and intended to improve internal control and results in other operating efficiencies of the Project. Mo ammad N em Haqmal Anud r ral Supreme Audit Office Page 3 of 3 Islamic Republic of Afghanistan Second Customs Reform and Trade Facilitation Project World Bank Reference: Project ID P112872; Grant ID H5680 & D0760 Financial Statements for the year ended 30th Qaws 1397 (20th December, 2018) Second Customs Reform and Trade Facilitation Project World Bank Reference: Project ID P112872; Grant ID H5680 & D0760 STATEMENT OF CASH RECEIPTS AND PAYMENTS FOR THE YEAR ENDED 30 QAWS 1397 (21 DECEMBER 2018) 1397 1396 Receipts/ Receipts/ Payments Payments Payments Controlled Controlled by Third by entity by entity Parties Total USD USD USD USD RECEIPTS Initial Advance . Replenishment 3,881,242 4,475,681 4,475,681 Direct Payment - - 1,800,000 1,800,000 Reimbursement - - 269,595 269,595 Temporary Loan from Governments funds - - . . TOTAL RECEIPTS 3,881,242 4,475,681 2,069,595 6,545,276 PAYMENTS Disbursement Category: Goods, works, consultants' services, Training and Operating Costs 3,580,794 5,377,681 - 5,377,681 Repayment of Temporary Loan from Government's Sources - - 269,595 269,595 Transfer to UNOPS - - 1,800,000 1,800,000 Refund to Donor - 16,543 - 16,543 Bank Charges 75 250 - 250 TOTAL PAYMENTS 3,580,869 5,394,474 2,069,595 7,464,069 Excess of Receipts over Payments 300,373 (918793) - (918,793) Taminat (Net) (239,015) 239,757 239,757 Increase/(Decrease) in Cash & Cash Equivalents 61,358 (679,036) (679,036) Cash and Cash Equivalents at the beginning of the year 163,562 842,598 - 842,598 lncrease/(Decrease) in Cash & Cash Equivalents 61,358 (679,036) - (679,036) Cash & Cash Equivalents at the end of the year 224,920 163,562 163,562 The accompanying notes form an integral part of thIs financial stat tnt. Zahid Hamdard Deputy Miister for Finance Ministry of Finance, Islamic Republic of Afghanistan Dated December 10, 2019 Second Customs Reform and Trade Facilitation Project (World Bank Reference: Project ID P112872; Grant ID H5680 & D0760) NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 QAWS 1397 (21 DECEMBER 2018) 1) LEGAL STATUS AND ACTIVITY a) The Second Customs Reform and Trade Facilitation Project grant agreement was set up in June 2010. The objective of the Project for Afghanistan is to improve the release of legitimate goods in a fair and efficient manner. b) The project is funded by two grants from the International Development Association bearing reference number H5680 in the amount equivalent to Special Drawing Rights (SDR) 33,300,000 and number D0760 in the amount equivalent to Special Drawing Rights (SDR) 15,300,000. An amount of SOR 11,924 was cancelled from the grant number H5680. c) The significant terms and conditions that determine or affect the availability of the funding assistance are primarily the presentation of the eligible expenditures to donor within the period as per and in accordance with the financing agreement. d) These financial statements of the Project have been prepared in accordance with the requirements of the Development Grant Agreement signed between the Government of the Islamic Republic of Afghanistan and the International Development Association in June 2010. 2) SIGNIFICANT ACCOUNTING POLICIES a) Basis of Preparation The financial statements are pred under the historical cost convention and in accordance with Cash Basis IPSAS - Fl nal Reporting under the Cash Basis of Accounting issued by International Federation 466Wtants (IFAC). b) Reporting Entity These financial statem r ai- for the Project referred to in para 1(a) and encompass the operations of the project 4ed-out out of the designated account of the project setup in lines with the stipulations of the finalqrAgagreement and funded by the grant(s) as specified in para 1(b). The transactions pertaining to"fnds disbursed by the donor to UNOPS who has been the implementing partner for the projecVuntil the end of April 2016, hired in terms of a Management Service Contract between UNOPS and the implementing agency, though related to and disbursed out of the grant funds are excluded from the purview of these financial statements as these have been separately reported in another set of financial statements prepared by UNOPS and audited by an another independent auditor hired by UNOPS. c) Payments Payments made from Special Account are recognised in the financial statements based on the date the cheque is issued and direct payments by World Bank are recognised on the date on which the withdrawal application for the payment is submitted to the World Bank. However, cheques or withdrawal applications that were ultimately rejected by the bank or the World Bank are reversed in the reporting period. Second Customs Reform and Trade Facilitation Project (World Bank Reference: Project ID P112872; Grant ID H5680 & D0760) d) 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. e) 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 aid received during the period. b) Initial Advance Initial advance represents the advance given by the World Bank into the designated bank account(s) of the project. c) 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. d) Payments made by third parti These represent payments djpify Snade by the World Bank, on basis of requests submitted by the Ministry of Finance in f rr9 of -6 withdrawal application, towards settlement of the claims, liabilities and contractual obli pons against contracts and agreements for eligible expenditures of the project as per the finan na agreement. These payments do not constitute cash receipts or payments by the entity and as5 pch re disclosed in the "Payments by Third Party" column in the statement of Cash Receipts and Pyments. e) Taminat The amount of Taminat reported in the Financial Statements represents net flow arising from deduction/repayment of security deposit (retention money) during the reporting period. f) 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. g) 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. Second Customs Reform and Trade Facilitation Project (World Bank Reference: Project ID PIl 12872; Grant ID H5680 & D0760) h) Appendices The accompanying appendices provide additional information and analysis and form an integral part of these notes, except as indicated otherwise, i) Others These Financial Statements are originally prepared in English and then translated into Dari. In the event of any inconsistency between the English and Dari versions, the English version shall be considered to be correct. Second Customs Reform and Trade Facilitation Project World Bank Reference: Project ID P112872; Grant ID H5680 & D0760 APPENDIX Al SUMMARY OF WITHDRAWAL APPLICATIONS FOR THE YEAR ENDED 30 QAWS 1397 (21 DECEMBER 2018) Description Application Number Initial Advance Amount USD USD D0760: DA-C 21 1,254,360 DA-C 20 1,055,709 DA-C 19 1,571,172 Second Customs Reform and Trade Facilitation Project World Bank Reference: Project ID P12872; Grant ID 115680 & D0760 APPENDIX A2 US Dollar SPECIAL ACCOUNT SUMMARY FOR THE YEAR ENDED 30 QAWS 1397 (21 DECEMBER 2018) Depository Bank: Da Afghanistan Bank (DAB) Address: Kabul USD A/c # 27690 Opening Balance as per Bank Statement 171,417 Add: Receipts from Donor 3,881,242 Total Additions 3,881,242 Deduct: Payment for Project Expenditure 3,815,280 Bank Charges 75 Total Deductions 3,815,355 Closing Balance as per B.S 30 QAWS 1397 (21 DECEMBER 2018) 237,304 Second Customs Reform and Trade Facilitation Project World Bank Reference: Project ID P112872; Grant ID H5680 & D0760 APPENDIX A3 US Dollar SPECIAL ACCOUNT RECONCILIATION FOR THE YEAR ENDED 30 QAWS 1397 (21 DECEMBER 2018) Depository Bank: Da Afghanistan Bank (DAB) Address: Kabul USD Closing Balance as per bank statement - 30 QAWS 1397 (21 DECEMBER 2018) A/c No. 27590 237,304 Less: Payment incorrectly charged to other account (12,384) Closing balance as per financial statements - 30 QAWS 1397 (21 DECEMBER 2018) 224,920 1 � � � � к °о й rn й ar г`�д � р � о tю � й аа r- кtэ ,� � г'�g з и° гsа �� � r`°- цs 'v j � � � �`С' �- й`°ц R й r с I � Q �!' � � ;� ш к° �� � � � о � о �� � о уС � � л � с°> � � и'�з скт й с� е ���з О С О с��Э � ц�] г�л � ¢ � - п3 � гD � с+5 r3 tЛ а!Ъ i'� N � � [}' f4 � r,�j �'. а�+ �f? 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