■ ■ ■ ■ ■ ■ . social ASSIStance system strengthening ProjeCt ■（Under the F他ancing Agre響entloncled竺NO・．ノPA??/4.-VN, 目国between theじOVemment Ot meどOCIallsf尺epUDllC OT Vlemam ano . the Intemational DeVelopment ASSOCIation(lDA)）、」 F【nanC旧1 StstementS ■ 31 December2017 ■ ■ ■ ■ . 2018-07-3 1 ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') CONTENTS Pages 1H Report of Project Management Unit 1-2 Independent auditor's report on the financial statements 3-4 Statement of off-budget assets, liabilities and fund balance 5 Statement of off-budget income and expenditure 6 Statement of off-budget sources and uses of funds 7 Statement of off-budget designated accounts 8 Statement of off-budget withdrawals 9 Statement of on-budget sources and uses of funds 10 Statement of on-budget uses of funds detailed by province 11 Statement of on-budget foreign currency deposit account 12 Notes to the financial statements 13-25 Independent assurance report on compliance 26-27 Independent assurance report on effectiveness of internal control 27-28 Appendix 1: Management letter 1 -22 U * Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') U REPORT OF PROJECT MANAGEMENT UNIT Project Management Unit of Social Assistance System Strengthening Project ("CPMU") presents this report and the financial statements of Social Assistance System Strengthening Project ("the Project") as at 31 December 2017 and for the year then ended. y THE PROJECT MANAGEMENT UNIT'S RESPONSIBILITY IN RESPECT OF THE FINANCIAL STATEMENTS Project Management Unit is responsible for the financial statements as at 31 December 2017 and for the year then ended which presents fairly: > assets, liabilities and fund balance as at 31 December 2017; > income and expenditure for the year ended 31 December 2017; > balances of the designated account as at 31 December 2017 and the movements of this account for the year then ended; > statements of expenditures for the year ended 31 December 2017; and > sources and uses of funds for the year ended 31 December 2017. In preparing these financial statements, Project Management Unit is required to: > select suitable accounting policies and then apply them consistently in accordance with the Financing Agreement for Credit No. IDA 5354 - VN ("Financing Agreement") between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA"), the Project Operation Manual ("POM"), other applicable laws and regulations; > state whether applicable accounting policies have been followed, subject to any material departures disclosed and explained in the financial statements; and > design and implement an effective internal control to enable the preparation of the financial statements those are free from material misstatement, whether due to fraud or error. Project Management Unit is responsible for ensuring that proper accounting records are kept, which disclose, with reasonable accuracy of assets, liabilities, funds balance, its income and expenses, and sources and uses of funds of Project for the reporting period and accounting books compliance with POM. They are also responsible for safeguarding the assets of the Project and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Project Management Unit confirms that they have complied with the above requirements in preparing the financial statements. U1 U * Social Assistance System Strengthening Project * Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') U REPORT OF PROJECT MANAGEMENT UNIT (continued) U STATEMENT BY PROJECT MANAGEMENT UNIT Project Management Unit does hereby state that, in its opinion: the accompanying financial statements give a true and fair view of the financial position of the Project as at 31 December 2017, the income and expenditure and sources and uses of funds for the year then ended in accordance with the accounting policies as described in Note 3 to the financial statements and POM; the funds provided by IDA and Government of Vietnam are utilised for the purposes defined in the Financing Agreement; the Project complies with the Financing Agreement, POM, and other applicable laws and regulations; and the Project designs and implements an effective internal control to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error, as well as to ensure compliance with the Financing Agreement, POM, laws and regulations applicable to the Project. For and on behalf of Project Management Unit Dang Kim Chung Project Director Hanoi, Vietnam 29 June 2018 2 Ernst & Young Vietnam Limited Tel + 84 24 3831 5100 8th Floor, CornerStone Building Fax: + 84 24 3831 5090 E Y 16 Phan ChU Trinh Street ey.comn Building a better Hoan Kiem District working world Hanoi, S.R. of Vietnam Reference: 61430372/20296268-HN INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS To: Project Management Unit of the Social Assistance System Strengthening Project Opinion We have audited the financial statements of Social Assistance System Strengthening Project ("the Project"), as set out on pages 5 to 25, which comprise of the statement of off-budget assets, liabilities and fund balance as at 31 December 2017, the statement of off-budget income and expenditure, the statement of off-budget sources and uses of funds, the statement of off-budget designated account, the statement of off-budget withdrawals, the statement of on-budget sources and uses of funds, the statement of on-budget uses of funds detailed by province and the statement of on-budget foreign currency deposit account for the year ended 31 December 2017 and the notes to the financial statements, including a summary of significant accounting policies. In our opinion, the accompanying financial statements of the Project are prepared, in all material respects, in accordance with the accounting policies as described in Note 3 to the financial statements and Project Operation Manual ("POM"). Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISA). 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 independent of the Project in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the financial statements in Vietnam, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Emphasis of Matter - Accounting policies We draw attention to Note 3 to the financial statements, which describes the accounting policies. Our opinion is not modified in respect of this matter. Other matter The financial statements of the Project for the year ended 31 December 2016 were audited by another audit firm which expressed an unmodified opinion on those statements on 24 June 2017. Responsibilities of Project Management to the Financial Statements Project management is responsible for the preparation of these financial statements in accordance with the accounting policies as described in Note 3 and POM to the financial statements, and for such internal control as Project management determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error. 1-e i-o nt&YU- iGo n 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 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 ISA, 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. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. We communicate with the Project management 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. For and on behalf of Ernst & Young Vietnam Limited Nguyen Thai Thanh Deputy General Director Audit Practising Registration Certificate No. 0402-2018-004-1 U Hanoi, Vietnam 29 June 2018 Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA") STATEMENT OF OFF-BUDGET ASSETS, LIABILITIES AND FUND BALANCE as at 31 December 2017 Currency: VND Beginning balance ITEMS Notes Ending balance (Restated) ASSETS Cash 4 38,664,480,603 39,360,515,234 Cash on hand 37,604,457 50,981,143 Cash in bank 38,626,876,146 39,309,534,091 Account receivables 21,894,842,618 520,507,869 Advances 5 21,532,443,013 24,221,587 Other receivables 351,857,085 436,286,112 Other advances 10,542,520 60,000,170 Fixed assets 5,477,658,621 6,100,010,255 Tangible fixed assets Tangible fixed assets, at cost 7,785,612,937 7,648,725,827 Less accumulated amortization (2,322,154,317) (1,567,648,906) Tangible fixed assets, net book value 5,463,458,620 6,081,076,921 Intangible fixed assets Intangible assets, at cost 26,500,000 26,500,000 Less accumulated amortization (12,299,999) (7,566,666) Intangible assets, net book value 14,200,001 18,933,334 TOTAL ASSETS 66,036,981,842 45,981,033,358 LIABILITIES AND FUND BALANCE Short - term liabilities 28,405,713,679 28,347,778,507 Payables 6 28,370,422,393 27,802,584,176 Taxes and amounts payable to the State budget 35,291,286 44,378,429 Payables to employees - 210,169,952 Other payables - 290,645,950 Fund balance 23,316,105,625 5,831,318,203 Represented by contributions from - IDA Fund 22,696,630,407 5,499,156,177 - Counterpart fund 590,395,208 303,643,446 - Other fund 29,080,010 28,518,580 Foreign exchange difference 8,837,503,917 5,701,926,393 Funds for fixed assets acquisition 5,477,658,621 6,100,010,255 TOTAL LIABILITIES AND FUND BALANCE 66,036,981,842 45,981,033,358 Preparer Chief Accountant Project Director Pham Quang Hau Nguyen Thi Sen Dang Kim Chung Hanoi, Vietnam 29 June 2018 5 W U g Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') U STATEMENT OF OFF-BUDGET INCOME AND EXPENDITURE for the year ended 31 December 2017 Currency: VND For the year ended Cumulative to Notes 31 December 2017 31 December 2017 INCOME Contribution from International Development Association (IDA) 7.1 169,968,069,103 455,849,132,370 Contribution from the Government of Vietnam 8 5,336,877,048 15,744,966,065 Other income 18,443,334 120,798,459 TOTAL INCOME 175,323,389,485 471,714,896,894 EXPENDITURE 9 Part 1: Strengthening the Social Assistance and Poverty Reduction System 77,905,386,773 272,755,201,249 Part 2: Launching a Consolidated Social Assistance Program 34,261,001,804 68,818,180,960 Part 2.1: Transfers of benefits to additional beneficiaries identified by the management information system Part 2.2: Transfers of service fees to the VN POST of the Project Provinces for the purpose of implementing the Transfers, including Benefits Transfers 34,261,001,804 68,818,180,960 Part 3: Project Management, Monitoring and Evaluation 14,776,406,786 54,404,602,360 Expenses for building an integrated management information system MIS1 and buying hardware for 59 provinces 30,895,806,700 52,420,806,700 TOTAL EXPENDITURE 157,838,602,063 448,398,791,269 SURPLUS OF EXPENDITURE OVER INCOME 17,484,787,422 23,316,105,625 Preparer Chief Accountant Project Director Pham Quang Hau Nguyen Thi Sen Dang Kim Chung Hanoi, Vietnam 29 June 2018 6 � ■ ■ О � О и о � О) О О О О 01 И С f� с0 и И �У (О (О (О О fD N ■ � �О м О V' 00 N Q� Q> С? 1� N �О Г с°О Омi Оиi О с0 СО О О Q1 О О) 1� OD N cD с0 1� р и V О а_ и а0 аО д' О 00 :oEL т г 2 I (Л �Q_ � � ЕйЕ Wt� �с�iСи; �с�ш��O� у tL � 00 N о Q о � L с т р о� ш�. а д с с Ш СЛ � I (/i � Z �. ш т � а� с � т� а"- ..� Ф с� с � 'р �� с � � 1 ■ � г � С � .р � р U J Q � U � � N � U � � � � И � �р И Q � � и L � � N II О GW >' tu�°-� слс � cv ��о�сшшсш х N С'j Ш � i N и �д °д т � с ш� ° �i�i � ��'�о а�ri,° � � t4 � �' Jaw (0 � 'а � ■ Ci Ш Ш �� � � с> с ы L:� а r�и in �'с� а Q CL .Е .с r о n� И о :а � д С2 � _ � п� Q Ш о ш о._ О Х го и л со о ' г� х О � Х N i� � О (� � �= ZvoU> О� ша¢и�и д�ш Е� о_ � иш а а. = N � � ■ Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') STATEMENT OF OFF-BUDGET DESIGNATED ACCOUNT as at 31 December 2017 and for the year then ended Bank account 21110370049970 Service bank Joint Stock Bank for Investment and Development of Vietnam - Hanoi Branch Address No 4B, Le Thanh Tong Street, Hoan Kiem District, Hanoi City, Vietnam Financing Agreement 5354-VN Currency USD BALANCES AND MOVEMENTS OF OFF-BUDGET DESIGNATED ACCOUNT Note USD VND equivalent Balances as at 31 December 2016 1,766,282.83 33,161,594,715 Add Amount received from International Development Association (IDA) 7.2 7,596,097.65 169,968,069,103 Bank charges refunded by BIDV 8.84 197,207 Foreign exchange difference - 8,837,503,917 Deduct Total amount withdrawn 7,669,467.24 173,986,000,117 Bank charges 1,371.40 31,115,724 Balances as at 31 December 2017 1,691,550.68 37,950,249,101 Balanc s as at 31 December 2017 as per 1,691,550.68 37,950,249,101 bank statement RECONCILIATION OF OFF-BUDGET DESIGNATED ACCOUNT USD Amount advanced by International Development Association at the beginning of the year 5,183,772.96 Additional advances from International Development Association in the year 7,596,097.65 Deduct: Total amount claimed for advance clearance in the year 9,106,154.51 Advance to designated account as at 31 December 2017 3,673,716.10 Balance of designated account as at 31 December 2017 1,691,550.68 Add: Amount withdrawn and not yet claimed as at 31 December 2017 1,982,165.42 Total advance to designated account as at 31 December 2017 3,673,716.10 Preparer Chief Accountant Project Director Pharn Quang Hau Nguyen Thi Sen Dang Kim Chung Hanoi, Vietnam 29 June 2018 8 � � � z �, . , , , � � ■ � С � U � ■ � � Ш т о �j � а ш ш и t� м и со .- г� ■ . � � о � с� с� со т r и г� -�. `- cZ � с м ао v v cti v� г� � _� ш �`�° и Гvии и .- i �-п т о со о с� �- с� . ш � � т� о со��г� ш ш � � L� о тт о о � �.и� о и с� и г� й � о о� о с� � t� м � � c�i oi � �� . � � � 'i а Ш U � i Q I, � � ■ са �° I ,iI � � � У � � �и,а с� � иоо и r 1i I о� , с� ш с� со о о ш ,,oq L. св � � � о� м йоо й ,1� ��i д � �> �-Q оо с� v_ v о ,, rn ■ � � Q� омо `nм� й м' � й о й м м и сд^:4 -Q � � N N N (� N И � G ■ � и_ � а � � ■ � � r r- � г� � и о � ооо о � � � cv cv си с� � Q � ■ � �� ��- _ � й а¢ � �, и�оQ � ■ г > „„ � О �, _ Z о � � ■ � � �= N N��� й � . � ш ос� й Г v й й й � _ � с� т о со о с� �- сч � о � � о со со v г� ш ш `'�. � ■ � о о� со о о � т �о rn с�и�й .- о � � � r, с� �- � c�i о� � � ш � ш Г с С� ■ � � о :� ,�, � с� � и о о и n. � i- U � � О� N Со О О СС ОО Q С ■ � > � О tD 1� О О h М ,� � . � -Q � U � 00 N д' � О о � � т � � ■ � � �° Q о rnмм й ш UZ ZЛ �t- � � с� с� c�i � N � � с•иj т �� iп � � г� г� г� � N Q с� .�и р ооо о � � � i-' � Q о �->'ш � о �а�д � � � mQ-' о ■ � Z_ �� `� �иГ � .* а � о с°у � � и � ~_ N N � о � � � � � ~ � � О N � • � � � � � � О О О О � � ■ СЛ Ш�- � � о СО а] т о� �' � Ш �,О о?� 0 �оо�о а`�i о � ��v IL а о м �, .о .о о о � � м � � л ' П3 с О �� т т ш со са т iъ +-' ° сс +� 'V (/) (L � U и ,'г�, .U U U U L N и � �,. ■ �й �Q � аз Q п °'аааа �д � = Е i и � � �'� Q ш ��QQCQ �� у � � � � ■ Q � о Ш (0 с'В t6 а с0 с6 с0 с4 О � � (� N N � � о Ш�, т � й с��а � с��ъ с��а � � � Ш д � U ш ш �� � c�i`Г° а��_а_�_� +°М о� а� о -�, II'' ■ (� �С� й° s� Qc°� ����� t�- а Qc°� �д г N 1 ■ ■ ■ Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') STATEMENT OF ON-BUDGET SOURCES AND USES OF FUNDS for the year then ended 31 December 2017 Currency: VND For the year ended 31 Cumulative to Items December 2017 31 December 2017 FUND ALLOCATION - 118,839,282,324 Fund from sponsors TOTAL 118,839,282,324 USED OF FUNDS Part 2.1: Transfers of benefits to additional beneficiaries identified by the management information system 19,480,200,000 43,487,460,000 TOTAL 19,480,200,000 43,487,460,00 AMOUNT BROUGHT FORWARD 75,351,822,324 The amount is being maintained in the State Treasury 0 Pham Quang Hau Nguyen Thi Sen Dang Kim Chung Preparer Chief Accountant Project Director Hanoi, Vietnam 29 June 2018 10 U * Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') STATEMENT OF ON-BUDGET USES OF FUNDS DETAILED BY PROVINCE for the year then ended 31 December 2017 Currency: VND For the year ended 31 Cumulative to 31 No Province December 2017 December 2017 1 Ha Giang Province 9,761,120,000 20,849,120,000 2 Lam Dong Province 2,644,150,000 5,828,940,000 3 Quang Nam Province 4,865,250,000 12,051,720,000 4 Tra Vinh Province 2,209,680,000 4,757,680,000 19,480,200,000 43,487,460,000 Pham Quang Hau Nguyen Thi Sen Dang Kim Chung Preparer Chief Accountant Project Director Hanoi, Vietnam 29 June 2018 * U W U1 W U U Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') STATEMENT OF ON-BUDGET FOREIGN CURRENCY DEPOSIT ACCOUNT for the year then ended 31 December 2017 BALANCE AND MOVEMENT OF FOREIGN CURRENCY ACCOUNT Currency: USD Money transferred from Money transferred from foreign currency account IDA to foreign curency to local currency in the Balance of foreign Year account State Treasury currency account 2016 5,425,708 5,425,708 2017 - - TOTAL 5,425,708 5,425,708 - MOVEMENT OF LOCAL CURRENCY ON THE STATE TREASURY Money received from Currency: VND foreign currency account Amount disbursed from Balance of local currency Year during the year the State Treasury in the State Treasury 2016 118,839,282,324 24,007,260,000 94,832,022,324 2017 - 19,480,200,000 75,351,822,324 TOTAL 118,839,282,324 43,487,460,000 75,351,822,324 Pham Quang Hau Nguyen Thi Sen Dang Kim Chung Preparer Chief Accountant Project Director Hanoi, Vietnam 29 June 2018 1 U M U1 Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') NOTE TO FINANCIAL STATEMENT as at 31 December 2017 and for the year then ended 1. PROJECT INFORMATION The Social Assistance System Strengthening Project ("Financing Agreement") was signed ci on 24 April 2014 by the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA") with the amount of US$ 60 million to finance for the Social S Assistance System Strengthening Projject ("the Project") and be effective from 22 July 2014. Counterpart fund is approximately VND 52.59 billion, equivalent to US$ 2.5 million; in which, H H fund from State Budget of VND 10.10 billion and fund from Province Budget of VND 42.49 billion. The overall objective of the Project is support the government in strengthening the social assistance system by developing innovations in management and service delivery nationwide, and by piloting these innovations in the 4 project provinces, including Ha Giang, Quang Nam, Lam Dong and Tra Vinh. The Project is implemented by the Ministry of Labor-Invalid and Social Affairs, the Government of the Socialist Republic of Vietnam and be decentralised to Central Project Management Unit in Hanoi ("CPMU") and 4 Provincial Project Management Units ("PPMU") in Ha Giang, Quang Nam, Lam Dong and Tra Vinh. The Project consists of 3 following components: (i) Part I - Strengthening the Social Assistance and Poverty Reduction System; Provision of support for the development and testing of improved mechanisms for social assistance delivery and management, including: Building a national database of social assistance beneficiaries and developing an integrated management information system (MIS) for nationwide use; Developing a social collaborator network in the Project Provinces and supporting communication-for- development activities at the national level and in the Project Provinces, including provision of remuneration for social collaborators; Developing and implementing a grievance redress mechanism in the Project Provinces; and Developing and implementing a monitoring and evaluation system, and providing support for policy formulation at the national level and in the Project Provinces. (ii) Part 2 - Launching a Consolidated Social Assistance Program; and Testing the improved mechanisms developed under Part I of the Project in the Project Provinces through the launching of social assistance consolidation, including: Part 2.1: Provision of Benefits to Additional Beneficiaries identified by the management information system; and Part 2.2: Provision of service fees to the VNPOST of the Project Provinces for the purpose of implementing the Transfers, including the Benefits. (iii) Part 3 - Project Management Provision of support for Project management activities, including: Operation of the Central Project Management Unit (CPMU) and Provincial Project Management Units (PPMUs); and Supervision, procurement, financial management, disbursement, audit, and monitoring and evaluation. 13 U g Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA") NOTE TO FINANCIAL STATEMENT (continued) as at 31 December 2017 and for the year then ended 2. BASIS OF PREPARATION Basis of preparation The Project's financial statements, except for the statement of designated account, are presented in Vietnam dong ("VND").The statement of designated account and the statement N of withdrawals are presented in United States dollars ("USD"). The Project's financial statements are prepared in accordance with the accounting policies described in Decision No. 19/2006/QD-BTC dated 30 March 2006 issued by the Ministry of Finance about "Enforcing the Regulations on Administrative Accounting" ("Decision 19") and Circular No. 185/2010/TT-BTC dated 15 November 2010 providing guidance on amending and supplementing the public sector administrative accounting regulations issued under the Decision No. 19/2006/QD-BTC and Project Operation Manual ("POM"). Fiscal year The Project's fiscal year applicable for the preparation of its financial statements starts on 1 January and ends on 31 December. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant policies adopted in the preparation of the financial statements are set out below: Contribution from the International Development Association ("IDA") Contributions from IDA are recognised when cash is transferred to the Project's designated account which is managed by the CPMU or when payments are made directly to suppliers, rather than when being committed or budgeted. Contribution from the Vietnamese Government ("counterpart fund") Contribution from the Vietnamese Government (which comprise of fund from State budget and fund from Province budget) are recognised when cash is deposited in the Project's State Treasury Accounts of Central Project Management Unit ("CPMU") and provincial project management units ("PPMU") in four provinces or when disbursements are made through the State Treasury Accounts at CPMU and PPMU at four provinces rather than when being committed or budgeted. Other income Receivables from sales of bidding documents and bank interest being recognised when cash is actually received into bank account. Expenditure Expense is recognised when activities are completed based on acceptance of workdone or equivalent supporting documents, are within detailed budget and approved by the Project Director. 14 U Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') NOTE TO FINANCIAL STATEMENT (continued) as at 31 December 2017 and for the year then ended 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Foreign exchange currency transactions Income and expenditure in other currencies are converted into VND at the exchange rate ruling at the date of transaction. Disbursement transactions in foreign currency are recorded W using first in, first out method (FIFO). Decision No. 19 does not require revaluation of monetary N balances denominated in foreign currencies as at the end of the year. NH Tangible fixed assets Tangible fixed assets are stated at cost less accumulated amortization. The cost of a tangible fixed asset comprises its purchase price and any directly attributable costs of bringing the tangible fixed asset to working condition for its intended use. When tangible fixed assets are sold or retired, cost and accumulated amortization are reduced from statement of assets, liabilities and fund balance and any gain or loss resulting from their disposal is included in the statement of income and expenditure. Intangible fixed assets Intangible fixed assets are stated at cost less accumulated amortization. The cost of an intangible fixed asset comprises its purchase price and any directly attributable costs of preparing the intangible fixed asset for its intended use. When intangible fixed assets are sold or retired, cost and accumulated amortisation are reduced from statement of assets, liabilities and fund balance and any gain or loss resulting from their disposal is included in the statement of income and expenditure. Amortization Amortization of tangible fixed assets and intangible fixed assets are calculated on a straight- line basis over the estimated useful life. Annual amortization rate is determined according to Circular No. 162/2014/TT-BTC dated 6 November 2014 issued by the Ministry of Finance, details as follow: Machinery and equipment From 12,5% - 20% Mean of transportation 6,67% Office equipment From 12,5% - 20% Computer software 16,67% Amotization is debited to funds for fixed assets acquisition. Advances to Project staff Advances to the Project officers to implement the Project's activities are carried as part of the fund balance until subsequent liquidation or clearance at approval of the Project management. U U1 U * Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA") NOTE TO FINANCIAL STATEMENT (continued) as at 31 December 2017 and for the year then ended 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Payables Payables are recognised base on payment amount for goods and services being provided and certificate of work done or other similar related supporting documents are completed and approved by the Project management but not yet paid at the end of reporting period. Personal income tax not yet paid to the Tax Authority and social security contribution not yet paid to Social Insurance Body at the end of reporting period are stated as payables on statement of assets, liabilities and funds. Capital expenditure and inventory All items of capital expenditure and inventory are recognized as part of the Project's expenses at the time of payments. 4. CASH Currency: VND 31 December 2017 31 December 2016 Cash at bank 38,626,876,146 39,309,534,091 Account in USD 37,950,249,101 38,863,521,108 Account in VND 676,627,045 446,012,983 Cash on hand 37,604,457 50,981,143 TOTAL 38,664,480,603 39,360,515,234 5. ADVANCES TO SUPPLIERS U Currency: VND 31 December 2017 31 December 2016 Provincial Departments of Labor-Invalids and Social Affairs 11,566,080,513 - Tri Nam Investment and Technology JSC 9,966,362,500 - Others - 24,221,587 TOTAL 21,532,443,013 24,221,687 16 U * Social Assistance System Strengthening Project * Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') W NOTE TO FINANCIAL STATEMENT (continued) * as at 31 December 2017 and for the year then ended 6. PAYABLES Currency: VND 31 December 2017 31 December 2016 FPT Information Systerm Co., Ltd -l Lotus Gold Vietnam JSC 19,967,904,085 Provincial Departments of Labor-Invalids' and Social Affairs - 9,904,927,808 Quang Nam Post Office 3,737,712,992 6,644,956,754 Ha Giang Post Office 2,652,570,000 2,366,339,010 Tra Vinh Post Office 888,065,592 1,533,142,584 Lam Dong Post Offices 463,552,740 469,349,820 FPT Information Systerm Co., Ltd (DL2) - 4,059,193,600 Others 660,616,984 2,824,674,600 TOTAL 28,370,422,393 27,802,584,176 1 U U1 *ENE MOEEEU OE E EE EEEESE MENEE M gMEag Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA") NOTE TO FINANCIAL STATEMENT (continued) as at 31 December 2017 and for the year then ended 7. CONTRIBUTION FROM INTERNATIONAL DEVELOPMENT ASSOCIATION ("IDA") 7.1 Reconciliation of contribution from IDA Amount actually received in the designated account Intermediate bank fee Total VND USD VND equivalent USD equivalent USD VND equivalent Accumulated as at 31 December 2016 13,083,781 285,879,894,737 55 1,168,530 13,083,836 285,881,063,267 Increase during the year Withdrawal Application No DAB008 2,915,298 64,877,033,903 - - 2,915,298 64,877,033,903 Withdrawal Application No DABO09 2,338,400 52,469,019,200 - - 2,338,400 52,469,019,200 Withdrawal Application No DABOO10 2,342,400 52,622,016,000 - - 2,342,400 52,622,016,000 Total fund received for the year ended 31 December 2017 7,596,098 169,968,069,103 - - 7,596,098 169,968,069,103 Accumulated as at 31 December 2017 20,679,879 455,847,963,840 55 1,168,530 20,679,934 455,849,132,370 18 M * Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') NOTE TO FINANCIAL STATEMENT (continued) as at 31 December 2017 and for the year then ended 7. CONTRIBUTION FROM INTERNATIONAL DEVELOPMENT ASSOCIATION ("IDA") (continued) 7.2 Reconciliation of contribution from IDA ERT For the year ended 31 December 2017 Cumulative to 31 December 2017 USD VND equivalent USD VND equivalent Contribution from IDA 7,596,097.65 169,968,069,103 20,679,933.87 455,849,132,370 In which: Contribution from IDA received through designated account 7,596,097.65 169,968,069,103 20,679,933.87 455,849,132,370 Contribution from IDA according to report on Statement of withdrawals 7,596,097.65 169,968,069,103 20,679,933.87 455,849,132,370 U_9 U U U U U U1 U *EUEE EEEUEEEEENEEIENUI.N. W... W N g Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') NOTE TO FINANCIAL STATEMENT (continued) as at 31 December 2017 and for the year then ended 8. CONTRIBUTION FROM THE GOVERNMENT OF VIETNAM (COUNTER PART FUND) Currency: VND For the year ended 31 December 2017 Cumulative to 31 December 2017 Fund from Fund from Fund from Central Provincial state Fund from Central Provincial state state budget budget Total state budget budget Total CPMU 1,428,972,423 - 1,428,972,423 6,079,265,397 - 6,079,265,397 PPMU Ha Giang - 1,850,000,000 1,850,000,000 - 4,196,535,000 4,196,535,000 PPMU Lam Dong - 929,324,285 929,324,285 - 2,145,198,579 2,145,198,579 PPMU Tra Vinh - 479,494,340 479,494,340 - 1,404,881,089 1,404,881,089 PPMU Quang Nam - 649,086,000 649,086,000 - 1,919,086,000 1,919,086,000 TOTAL 1,428,972,423 3,907,904,625 5,336,877,048 6,079,265,397 9,665,700,668 15,744,966,065 20 'n" '4--)C WWWWEEgggagEU EE U Eag .E...g ...N.... Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') NOTE TO FINANCIAL STATEMENT (continued) as at 31 December 2017 and for the year then ended 9. EXPENDITURE 9.1. Expenditure by categories and sources of funds Currency: VND For the year ended 31 December 2017 Cumulative to 31 December 2017 Counter part IDA fund Counter part fund Other fund Total IDA fund fund Other fund Total Part 1: Strengthening the Social Assistance and Poverty Reduction System 77,905,386,773 - - 77,905,386,773 272,755,201,249 - - 272,755,201,249 Part 2: Launching a Consolidated Social Assistance Program 34,261,001,804 - - 34,261,001,804 68,818,180,960 - - 68,818,180,960 Part 2.2: Provision of service fees to the VNPOST of the Project Provinces for the purpose of implementing the Transfers, including the Benefits 34,261,001,804 - - 34,261,001,804 68,818,180,960 - - 68,818,180,960 Part 3: Project Management 9,703,570,616 5,068,211,448 4,624,722 14,776,406,786 39,158,313,054 15,154,570,857 91,718,449 54,404,602,360 Expenses for building an integrated management information system MISI and buying hardware for 59 provinces 30,895,806,700 - - 30,895,806,700 52,420,806,700 - - 52,420,806,700 In which: Construction in progress 30,895,806,700 - - 30,895,806,700 52,420,806,700 - - 52,420,806,700 TOTAL 152,765,765,893 5,068,211,448 4,624,722 157,838,602,063 433,152,501,963 15,154,570,857 91,718,449 448,398,791,269 21 -0 1 > 2 - ,1 ! W*WWWEWWWEWaUaggaggaggUggEEgg1 Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') NOTE TO FINANCIAL STATEMENT (continued) as at 31 December 2017 and for the year then ended 9. EXPENDITURE (continued) 9.2. Actual expenditure and budget comparison Currency: VND For the year ended 31 December 2017 Cumulative to 31 December 2017 Budget for the Actual Disbursement Actual whole project Disbursement expenditure Approved budget Variance rate (%) expenditure period Variance rate (%) Part 1: Strengthening the Social Assistance and Poverty Reduction System 77,905,386,773 150,690,000,000 (72,784,613,227) 52% 272,755,201,249 490,992,000,000 (218,236,798,751) 56% Part 2: Launching a Consolidated Social Assistance Program 34,261,001,804 35,000,000,000 (738,998,196) 98% 68,818,180,960 105,180,000,000 (36,361,819,040) 65% Part 2.2: Provision of service fees to the VNPOST of the Project Provinces for the purpose of implementing the Transfers, including the Benefits 34,261,001,804 35,000,000,000 (738,998,196) 98% 68,818,180,960 105,180,000,000 (36,361,819,040) 65% Part 3: Project Management 14,776,406,786 21,849,860,615 (7,073,453,829) 68% 54,404,602,360 115,698,000,000 (61,293,397,640) 47% Expenses for building an integrated management information system MISI and buying hardware for 59 provinces 30,895,806,700 60,000,000,000 (29,104,193,300) 51% 52,420,806,700 76,980,000,000 (24,559,193,300) 68% TOTAL 157,838,602,063 267,539,860,615 (109,701,258,552) 59% 448,398,791,269 788,850,000,000 (340,451,208,731) 57% 22 Z$J Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') NOTE TO FINANCIAL STATEMENT (continued) as at 31 December 2017 and for the year then ended 10. COMMITMENTS As at 31 December 2017, Project management did not make payment for construction contracts with the amount of VND 84.4 billion (as at 31 December 2016: VND 19.3 billion). M II U Ul 11 II II II U U2 U aWWWWWWWag UUU UUaaggNEEaUaaggg Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') NOTE TO FINANCIAL STATEMENT (continued) as at 31 December 2017 and for the year then ended 11. RESTATEMENT OF CORRESPONDING FIGURES Certain figures in the financial statements as at 31 December 2016 and for the year then ended were restated by the Project management. Details are as below: (i) Statement of assets, liabilities and fund balance as at 31 December 2016 Currency: VND As previously stated Restatement Restated amount Foreign exchange difference - 5,701,926,393 5,701,926,393 CPMU recorded realized foreign exchange difference incurred from the beginning of the Project to 31 December 2016 which was not recorded in the financial statement of 2016. (ii) Accumulated expenditures for the period up to 31 December 2016 Currency: VND Accumulated to 31 Accumulated to 31 December 2016 (As December 2016 Expenditure Accumulated to 31 Expenditure previously stated) Restatement (Restated amount) incurred in 2017 December 2017 - Part 1: Strengthening the Social Assistance and Poverty Reduction System 200,676,178,817 (5,826,364,341) 194,849,814,476 77,905,386,773 272,755,201,249 - Part 2: Launching a Consolidated Social Assistance Program 22,826,111,724 11,731,067,432 34,557,179,156 34,261,001,804 68,818,180,960 Part 2.2: Provision of service fees to the VNPOST of the Project Provinces for the purpose of implementing the Transfers, including the Benefits 22,826,111,724 11,731,067,432 34,557,179,156 34,261,001,804 68,818,180,960 - Part 3: Project Management 36,678,763,296 2,949,432,278 39,628,195,574 14,776,406,786 54,404,602,360 - Other 73,836,545 21,451,163,455 21,525,000,000 30,895,806,700 52,420,806,700 24 U * Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') NOTE TO FINANCIAL STATEMENT (continued) as at 31 December 2017 and for the year then ended 11. RESTATEMENT OF CORRESPONDING FIGURES (continued) (ii) Accumulated expenditures for the period up to 31 December 2016 (continued) The Project management adjusted accumulated expenditures up to 31 December 2016 for several expenditures in order to recognise these expenditures on accrual basis in accordance with the accounting policies applied for the balance sheet'rather than based on cash basis as presented in the previous year financial statements. Preparer Chief Accountant Project Director Pham Quang Hau Nguyen Thi Sen Dang Kim Chung Hanoi, Vietnam 29 June 2018 U U U2 Reference: 61236259/20296268 - Compliance INDEPENDENT ASSURANCE REPORT ON COMPLIANCE To: Project Management - Social Assistance System Strengthening Project We have examined the compliance of the Project management of the Social Assistance System Strengthening Project ("the Project") including Central Project Management Unit ("CPMU"), Project Management Unit of Ha Giang province ("Ha Giang PPMU"), Project Management Unit of Lam Dong province ("Lam Dong PPMU"), Project Management Unit of Quang Nam province ("Quang Nam PPMU"), Project Management Unit of Tra Vinh province, ("Tra Vinh PPMU") (also referred to as "4 PPMUs") with the applicable laws, regulations, procurement procedures and other provisions of the Financing Agreement between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA") (the "Financing Agreement") for the year ended 31 December 2017. CPMU and 4 PPMUs are responsible for the compliance with the Financing Agreement, the Project Operation Manual ("POM"), other laws and regulations applicable to the Project (collectively referred to as "the Project's regulations"). Auditor's responsibility Our responsibility is to express an opinion, based on our examination, on the compliance of CPMU and 4 PPMUs with the Project's regulations that could have a direct and material financial effect to the financial statements of the Project during the year ended 31 December 2017. We conducted our examination in accordance with the principles of International Standard on Assurance Engagements 3000 - "Assurance Engagements other than Audits or Reviews of Historical Financial Information" ("ISAE 3000") insofar this standard could be usefully applied in this examination and in its specific compliance context. This standard requires that we comply with ethical requirements and that we plan and perform the examination to obtain reasonable assurance about whether CPMU and 4 PPMUs comply with the Project's regulations that could have a direct and material financial effect to the financial statements. Our examination included obtaining a sufficient understanding of the Project and the Project's regulations; assessing the risk on non-compliance exists that could have a direct and material financial effect to the financial statements of the Project; testing and evaluating, on a sample basis, the compliance of CPMU and 4 PPMUs with the Project's regulations based on the assessed risk; and performing such other procedures as we considered necessary in the circumstances. We considered the following criteria in evaluating the compliance of CPMU and 4 PPMUs with the Project's regulations: CPMU and 4 PPMUs' awareness of the Project's regulations; the implementation of the Project's regulations by CPMU and 4 PPMUs; the significance to the financial statements where CPMU and 4 PPMUs fail to comply with one requirement or several requirements in the Project's regulations, if any; and that a weakness or a deficiency existed where CPMU and 4 PPMUs fail to comply with one or several requirements in the Project's regulations that could have a direct and material financial effect to the financial statements. We believe that our examination provides a reasonable basis for our qualified opinion. W Basis for Qualified Opinion In accordance with Official letter No. 36/BQLDA-KTVN dated 14 March 2017 by the Project management providing guidance on the implementation of Cash receipt book of household ("Cash receipt book"), the district post office has responsibility to distribute the Cash receipt book to beneficiary households. However, we noted that at Cang Long district of Tra Vinh province and Tam Ky city of Quang Nam province, beneficiary households have not received these books yet. Therefore, Tra Vinh PPMU, Quang Nam PPMU, Cang Long Post Office and Tam Ky city Post Office have not complied strictly with guidance about the Cash receipt book distribution under the Official letter No. 36/BQLDA-KTVN. Qualified Opinion In our opinion, except for the effects of the matter described in the Basis for Qualified Opinion paragraph, the Project management comply, in all material respects, with the Project's regulations that could have a direct and material financial effect to the financial statements of the Project for the year ended 31 December 2017 based on the evaluating criteria above. Other Matters We draw attention to Appendix 1 - Management letter in which we discussed minor departures from the Project's regulations which have no direct and material financial effect to the financial statements of the Project but may put the Project's objectives at risk. This examination involved a historic evaluation of the compliance of the Project management with the Project's regulations at a specific point in time. Thus, this examination does not provide assurance for future periods due to the risk of changes in the Project's regulations, or that the degree of compliance with the Project's regulations may deteriorate. For and on behalf of Ernst & Young Vietnam Limited Nguyeri Thai Thanh Deputy General Director Audit Practising Registration Certificate No. 0402-2018-004-1 Hanoi, Vietnam 29 June 2018 Reference: 61236259/20296268 - Internal control INDEPENDENT ASSURANCE REPORT ON THE EFFECTIVENESS OF g INTERNAL CONTROL U To: Project Management - Social Assistance System Strengthening Project We have audited the design and operating effectiveness of the internal control of Vietnam Irrigated Agricultural Improvement Project ("the Project") as operated by the management of the Project including Central Project Management Unit ("CPMU"); Project Management Unit of Ha Giang province ("Ha Giang PPMU"); Project Management Unit of Lam Dong province ("Lam Dong PPMU"); Project Management Unit of Quang Nam province ("Quang Nam PPMU"); Project Management Unit of Tra Vinh province ("Tra Vinh PPMU") (also referred to as "4 PPMUs") which existed during the year ended 31 December 2017. The internal control was set up for the purpose of managing risks no achievement of the Project's objectives, including the reasonable prevention and detection of errors, irregularities and fraud. The internal control is the responsibility of the Project management. Auditor's Responsibility Our responsibility is to express an opinion, based on our audit, on the effectiveness of the internal control that could have a direct and material financial effect to the financial statements of the Project for the year ended 31 December 2017. We conducted our audit in accordance with the principles of International Standard on Assurance Engagements 3000 - Assurance Engagements other than Audits or Reviews of Historical Financial Information ("ISAE 3000") insofar this standard could be usefully applied in this audit and in its specific compliance context. This standard requires that we comply with ethical requirements and that we plan and perform the audit to obtain reasonable assurance about whether the internal control for the Project is adequately designed for the purpose of the Project and was operating effectively during the period covered by the audit. Our audit included obtaining a sufficient understanding of the Project, and the internal control for the Project; assessing the risk that a material weakness exists that could have a direct and material financial effect to the financial statements of the Project; testing and evaluating, on a sample basis, the design and operating effectiveness of internal control based on the assessed risk; and performing such other procedures as we considered necessary in the circumstances. We considered the following criteria in evaluating the effectiveness of the internal control: the requirement for design and implementation of the internal control in the Project Operation Manual ("POM"); the appropriateness of the internal control for the Project's activities and objectives; the implementation of the internal control by the Project management to achieve its objective of prevention and detection of errors, irregularities and fraud that could have a direct and material financial effect to the financial statements of the Project; the significance to the financial statements where one control or several controls did not operate as designed, if any; and that a weakness or a deficiency existed where a control or several controls did not reasonably prevent or detect risks that could have an adverse impact on the objectives of those internal controls which are to provide reasonable assurance that the financial statements are prepared, in all material respects, in accordance with the adopted accounting policies and POM, that the funds are utilised for the purposes defined in the Financing Agreement between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA") ("the Financing Agreement") and that the Project complies with the Financing Agreement, POM and other applicable laws and regulations. We believe that our audit provides a reasonable basis for our qualified opinion. Basis for Qualified Opinion In accordance with Official letter No. 36/BQLDA-KTVN dated 14 March 2017 by the Project management providing guidance on the implementation of Cash receipt book of household ("Cash receipt book"), the district post office has responsibility to distribute the Cash receipt book to beneficiary households. However, we noted that at Cang Long district of Tra Vinh province and Tam Ky city of Quang Nam province, beneficiary households have not received these books yet. Therefore, Tra Vinh PPMU, Quang Nam PPMU, Cang Long Post Office and Tam Ky city Post Office have not strictly implemented control over the Cash receipt book distribution. Qualified Opinion In our opinion, except for the effects of the matter described in the Basis for Qualified Opinion paragraph, the Project's internal control which existed in CPMU and 4 PPMUs during the year ended 31 December 2017, in all material respects, was adequately designed for the purpose of the Project and operated in an effective manner, based on the evaluating criteria above. Other Matters We draw attention to Appendix 1 - Management letter in which we discussed findings from the internal control which have no direct and material financial effect to the financial statements of the Project but may put the effectiveness of Project's internal control at risk. This audit involved a historic evaluation of the internal control at a specific point in time. Thus, this audit does not provide assurance for future periods due to the risk that internal control may become inappropriate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate. M For and on behalf of Ernst & Young Vietnam Limited U M Nguyen Thai Thanh Deputy General Director M Audit Practising Registration Certificate No. 0402-2018-004-1 Hanoi, Vietnam 29 June 2018