WORLD) BANK PIRO.lE(iT `JND 21 DE(EM BER 2017 - ---- -- Supreme Audit Office Governnent of Islamic Republic of Afghanistan Auditor's Report To Date: 27 October 2018 H F Minister of Finance, Government of Islanie Repl$blic of Afghanistan Kabul Independeiil Auditors' Report on the Financial Statements LWe have audi ted the accompnng statements of' Cash Receipts and Pay ments (the naneial Statements) of the Aflanisian Power System De\elopiiment Project bearing World Bank Piroject Il) number 11 1 1943 financed Linder GIrant Numiber TF935 13 (hereinaier re lerred to as the IProject~) for tie financial year ended 30 Qaws of Solar Year 1396 (2 1 December 2016 to 21 )ecemlber 20 [7), and a slinimarv ol siglificniit accou1i1n pol icies and other esxplanatory notes forming part of the Fiinancial Stateients. The Ministry of Finance's Responsibility for the Financial Statements and Compliance wxith Grant Agreement 2. ie Miiistrv of linance (ie Ministry") is responisible for preparation and faIi presentation of hile financial Statements in ccordance with International Public Sector Acconting Standaird --[iFinneiail Reporting under Ilie Cask Basis of Accouting." This responsibilit\ neludes designing, iiplemeningp and mainaining internal control relevant to Ilie preparution and fair preseiitition of the 1inancial statements vlhich are 1rce from nmaierial missiatemeniL whether du to rudLi or error: selecting and applying uppropriate accountilng poliees: and making uceoniing estimates that are reasonable in the circlistances. 3. ln addition, Ilie Ministry is also responsible tor ensring that the activities. financial transacttons and information refleeted in the financial statmlents are n conipI lance wit Ii the Piroject's Grant Agreeient. The Grant Agreement Number TF93513 dated March 19, 2009 entered into between ilie 1slumic Republic of A-ghanistan and Ilie International Development Assoc iat ion for the prov ision o Th irty Five Ml il i on Un ted State Dollars f( 3000,000). Additional rant amountion L to Uni ted State Dol lars T w eni ty Iiv e M il 1ion ( 0S 200.0000) was granted vide an amendment to the donor liiiancinu agreetnent carried Pae 1 o: 3 o( in I ebriarN 201 I. and throughi vet another amendment dated lUlV 29. 2015 a further amount o1 I-Vited State Dollars I leen \Million (U $15,000.000) was provided therch iueaaing the total grant amount to U1nited Slate Do]lars Seventy live \lillion (1.\\ 75.000.000) for funding to the Project. Auditor-'s RespJonsibility 4. Our responsii it> is to express an opinion on these Fihnancal Statements based on our audit. We ha e conducted audit of the [inancial statements. pr(tject operations and related internal controls in accordance ith International Standards of SupIreme Audit Institutions (NSSAs'). Those Standards require that SAO comply wt ith ethical regulations and plan and perform Whe audit to obtain reasonable assurance of the financial statements being lice Irom material misstatement. [hose standards require that SAO express its opinion on whIlether the financial statements present Utirly. in all material respects. the cash receipts and paymenits o f the project. 5 In addition to the responsibilit> to express an opinion on the tinancial statements described above. Our responsihilit> includes expressing an opinion on whether the activities, 11nancial transactions and information reflected in the financial statements are. in all material respects. in compliance xwith the Projec's (ant Agreement. Iis responsibility includes performing procedures to obtain audit evicdence about hether all payiments and receipts are in compliance ith the terms and conditions of Grant Agreement. 6. An arduit inVOIles perfor11ming procelures to obtain reasonable and Jypropriate au it clidence Jborit tle aimouints andti dkelosures in the financ1al statements. I he procedtires slcted depend on the atid r'sJ idgenielnt. incltding te assessment ol'the risks of m1aterial ininsstemen of tIle financial statements , wether due to fraud or error. Il mlakinit the risk j,>s4Nsleilt internal controls relevan1 to the entt,s preparatio and presIlatilon 01 AnlciaI stateents are considered in ordr to design audit prOCeurs tlL are approprIAe in te e icninlstailces but not 10 the purposes of expressing aii op1i1n 11 the clfectivenew of internal controls. Al audA also in lides eva lating the appropriaewness of =otin,iole polics riser], the reasonablel1ess of accorinting estimates mnade by i-1anagenent. as kel Ias VaIUat ilg the presention of the [inanIa statemlent. 7. I he total (Rant of 11) 75100000 consists of IA S) 60.000000 witi 1inistry of Fnerg & Water (1101- W) and additional Grant of 15,000.000 x\itli Da Aghanistan BI'eshna Sherkat (DABS). The activities in [A\liS were closed on \a> 31. 2017 wvith total project expendium of I1 59.4 million and refund oft .5106 million and the renaining amoit of Grants tolited cancelled, 8. We believe that the audit evidence ive have obtained is reasonable and appropiae io provide a basis fbr our opinion. Pao 2 03 Opinion1 9 ln our opinion the Finaneial Statements present ` irlv, in all material respects. Cash receipts and panienits oj' the A tghanistan Po\er System Developnent Project bearing World Bank Project I) number PIl 1943 linanced Lnder Grant NumberT 1935 13 for the financial year ended 30 Qaws of Solar Year 1396 (21 December 2016 to 2 1 December 20]17) in accordance with 1lernalional Public Sector Accounting Standard "Financial Reportilng- linder the Cash Basis of Accotiing. 10. In our opinion. in all material respects, the activities, inancial transactions and information rellected in the tinancial statements are in compliance with (be terms and conditions of lProjec s Grant Agreement Lc lanagement Letter, attaehed to this Audit Report, highl1ighis areas of iiiprovement in inancinal managemeninlu1tdling compliance with financial covenants of the 1 rant Agereceents and of resu]ts of its operations for the financial year ended 30 Qaxws of Solar Year 1396 (21 December 2016 te 21 December 2017). These observations and recommendations have been comnwn tiaicated to and di scussed with the IProject and are intended to improve internal controls and result in other1ficiencies of the Project. Dr.1 nm mgßJ krif Sharifi J t-~~ GC ial of A fghaniiistanl peeAuidit Offlice Kabul. A\lhanistan K aic 3 u! 3 Islamic Republic of Afghanistan mghanistan Power System Development Project World Bank Reference: Projeet ID P111943; Grant ID TF 93513 Financial Statements for the year ended 30th Qaws 1396 (215 December, 2017) Afghanistan Power System Development Project NVorld Bank Reference: Project ID Pl11943; Grant ID TF 93513 STATEMENT OF CASH RECEIPTS AND PAYMENTS FOR THE YEAR ENDED 30 QAWS 1396 (21 DECEMBER 2017) 1396 1395 Cumulative Receipts/ To Date Payments Payments Controlled by Third by entity Parties Total Total USD USD USD USD USD RECEIPTS Init aI Advance - 1.000,000 4,000,000 Direct Payments - 652,857 652,857 123,340 4,384,259 Special Commitments 415,180 30.806,614 Repltnishments 3,727 3,727 20,461706 Taxes collected to be transfefred (10,725) (10,725) 10,725 TOTAL RECEIPTS (6,998) 652,857 645,859 1,549,245 59,652,580 PAYMENTS Disbursement Category: Goods, Works, Training. Consultant's Services & Incremental Operating Costs 931,454 652,857 1,584,311 609,832 59,414.245 Refund to donor 57,771 - 57,771 548,700 606,471 Bank Charges 25 - 25 25 750 TOTAL PAYMENTS 989,250 652,857 1,642,107 1,158,557 60,021,466 Excess of Receipts over Payments (996248) - (996,248) 390,688 (368,886 tam i ni at (Net) - - -- 368,886 Increase?(Decrease) in Cash & Cash Equivalents (996,248)- (996,248) 390,688 - Cash and Cash Equivalents at the beginning of the year 996,248 996,248 605,560 increasc/(Decrease) in Cash & Cash Equivalents (996,248) (996,248) 390,688 Cash and Cash Equivalents at the end of the year - - 996,248 The accom panying notes form an integral part of this financial statement. IKhalidPayenlda De p uty Minister for Finance Ministry of Finance, Islamic Republic of Afghanistan Dated: October 8,2018 Afghanistan Power System Development Project World Bank Reference: Project ID P111943; Grant ID TF 93513 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 QAWS 1396 (21 DECEMBER 2017) 1) LEGAL STATUS AND ACTIVITY a) The Afghanistan Power System Development Project grant agreement was set up in March 2009. The project's objective is to support the recipient in (i) access to grid power; and (ii) the quantity of available power, for the consumers in the target urban centers of Pul-e-Khumari, Charikar, Gulbahar and Jabal-es-Saraj. b) The project is financed by a grant bearing reference number 93513 from the Afghanistan Reconstruction Trust Fund in the amount of US Dollars 35,000,000. Additional grant amounting to US Dollars 25,000,000 was granted vide an amendment to the donor financing agreement carried out in February 2011, and through yet another amendment a further amount of USD 15,000,000 was provided thereby increasing the total grant amount to US Dollars 75,000,000. c) The project consists of the following Parts: i) Distribution System Rehabilitation ii) Rehabilitation of Transmission Switchyards iii) Institutional Capacity Building and Project Management Support d) The significant terms and conditions that determine or affect the availability of the funding assistance are primarily the presentation of eligible expenditures to donor within the period as per and in accordance with the financing agreement. e) These financial statements of the Afghanistan Power System Development Project have been prepared in accordance with the requirements of the Grant Agreement signed between the Government of the Islamic Republic of Afghanistan and the International Development Association (acting as the Administrator of the Afghanistan Reconstruction Trust Fund) in March 2009 as amended from time to time. 2) SIGNIFICANT ACCOUNTING POLICIES a) Basis of Preparation The financial statements are prepared under the historical cost convention and in accordance with Cash Basis IPSAS - Financial Reporting under the Cash Basis of Accounting issued by International Federation of Accountants (IFAC). b) Reporting Entity These financial statements are for the Project referred to in para 1(a) which is funded by the grants as specified in para 1(b) and encompass the operations of the project to the extent funded by those grants. 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. Afghanistan Power System Development Project World Bank Reference: Project ID P111943; Grant ID TF 93513 d) Currency translations Transactions in currencies other than the reporting currency are translated into US Dollar at the rate of exchange at which the transaction is actually executed. 3) NOTES TO ACCOUNTS / a) Initial Advance Initial advance represents the advance given by the WotId Bank to open the special account. b) Receipts These represent grants and aid received during the period ahd the amount of taxes collected but not transferred until the end of the financial year. c) Reporting Currency The reporting currency is US Dollars. Since US Dollars is the principal disbursement currency of the donor, the financial statements are not prepared in the Afghani which is the currency of Afghanistan. d) 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. e) 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. f) Payments made by third parties These represent payments directly made by the World Bank, on basis of requests submitted by the Ministry of Finance in form of a withdrawal application and against special commitments that are issued by the World Bank at the request of the Ministry of Finance on the basis of an irrevocable letter of credit, towards settlement of the claims, liabilities and contractual obligations against contracts and agreements for eligible expenditures of the project as per the financing agreement. These payments do not constitute cash receipts or payments by the entity and as such are disclosed in the "Payments by Third Party" column in the statement of Cash Receipts and Payments. g) Taminat The amount of Taminat reported in the FS represents net flow arising from deduction/repayment of security deposit (retention money) during the reporting period. Afghanistan Power System Development Project World Bank Reference: Project ID P111943; Grant ID TF 93513 h) 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. i) Appendices The accompanying appendices provide additional information and analysis and form an integral part of these notes, except as indicated otherwise. j) Others These Financial Statements are originally prepared in English and then translated into Dart In the event of any inconsistency between the English and Dari versions, the English version shall be considered to be correct. Afghanistan Power System Development Project World Bank Reference: Project ID P111943; Grant ID TF 93513 APPENDIX Al SUMMARY OF WITHDRAWAL APPLICATIONS FOR THE YEAR ENDED 30 QAWS 1396 (21 DECEMBER 2017) Description Application Number Initial Advance Amount USD USD Refunds Application Ran :RN0000003500 (57,671) - Direct Payment 48 652,857 DA-B 41, , 3,727 Afghanistan Power System Development Project World Bank Reference: Project ID P111943; Grant ID TF 93513 APPENDIX A2 US Dollar SPECIAL ACCOUNT SUMMARY FOR THE YEAR ENDED 30 QAWS 1396 (21 DECEMBER 2017) Depository Bank: Da Afghanistan Bank (DAB) Address: Kabul USD Alc 27580 Opening Balance as per Bank Statement / 996,248 Add: Replenishments 3,727 Total Additions 3,727 Deduct: Payment for Project Expenditures 942,179 Refund to donor 57,771 Bank Charges 25 Total Deductions 999,975 Closing Balance as per B.S 30 QAWS 1396 (21 DECEMBER 2017) Afghanistan Power System Development Project World Bank Reference: Project ID P111943; Grant ID TF 93513 APPENDIX A3 US Dollar SPECIAL ACCOUNT RECONCILIATION FOR THE YEAR ENDED 30 QAWS 1396 (21 DECEMBER 2017) Account No: 27325 Depository Bank: Da Afghanistan Bank (DAB) Address: Kabul USD Closing Balance as per bank statement - 30 QAWS 1396 (21 DECEMBER 2017) Closing balance as per financial statements - 30 QAWS 1396 (21 DECEMBER 2017) - Afghanistan Power System Development Project World Bank Reference: Project ID Pl11943; Grant ID TF 93513 APPENDIX A4 COMPONENT-WISE DISBURSEMENTS FOR THE YEAR ENDED 30 QAWS 1396 (21 DECEMBER 2017) (Memorandum Statement - not an integral part of the Financial Statements) 1395 1396 Cumulative to Components Date USD USD USD Distribution System Rehabilitation 552,991 1,584,311 38,679,348 Institutional Capacity Building and Project Management 56,841 - 20,734,897 Bank Charges 25 25 750 TOTAL PAYMENTS 609,857 1,584,336 59,414,995 Afghanistan Power System Development Project World Bank Reference: Project ID P111943; Grant ID TF 93513 Appendix AS STATEMENT OF GRANT FUNDS AVAILABLE FOR THE YEAR ENDED 30 QAWS 1396 (21 DECEMBER 2017) Amount In currency of commitment Amount of Grant USD 75,000,000 Amount disbursed by World Bank untill the end of 1396' USD 59,046,310 Undisbursed Balance USD 15,953,690 In reporting currency Amount disbursed by World Bank untill the end of 13961 USD 59,046,310 Equivalent US Dollars for undisbursed amount USD 15,953,690 Total estimated amount of Grant Funds available USD 75,000,000 Cumulative Payments for expenditure as per the Statement of Cash Receipts & Payments USD 59,046,109 1. Actual amounts of total disbursement made by the World Bank as available from Client Connection.