Islamic Republic of Afghanistan Supreme Audit Office AUDIT REPORT FY 1397 (2018) Project ID) Grant Number Project Name P131864 TF-017061 Kabul Urban Transport Efficiency Improvement Project December 2019 Islamic Republic of Afghanistan Supreme Audit Office Reference Number: ........ Date / 3 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 Kabul Urban Transport Efficiency Improvement Project bearing World Bank Project ID Number P131864 financed under Grant Number TF017061 (hereinafter referred to as "Project") for the financial year ended on 30 Qaws 1397 (21 December 2018), which comprise a summary of significant accounting policies and other explanatory notes forming part ofthe 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 on 30 Qaws 1397 (21 December 2018) in accordance with Cash Basis IPSAS (International Public Sector Accounting Standard) - "Financial Reporting under the Cash Basis of Accounting" and comply with the terms and conditions of Project's Grant/ or Financing Agreement. Basis for Opinion We conducted our audit in accordance with International Standards of Supreme Audit Institutions ("ISSAls"). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit ofthe Financial Statements section of our report. We are the Supreme Audit Institution (SAI) of Islamic Republic of Afghanistan and independently derive our legal mandate from the Supreme Audit Office Law and in accordance with the Code of Ethics implemented by the SAO based on the ISSAI 130- Code of Ethics together with the ethical requirements that are relevant to our audit of the financial statements in Afghanistan and applicable to SAO auditors including external experts for the audit, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics of SAO. Page 1 of 3 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of Ministry of Finance for the Financial Statements The Ministry of Finance is responsible for the preparation and fair presentation of the project financial statements in accordance with International Public Sector Accounting Standards "Financial Reporting under the Cash Basis of Accounting" and for such internal control as 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 circumstances, but not for the purpose of expressing an opinion on the effectiveness of the project's internal control. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. Page 2 of 3 * Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. * Evaluate the financial transactions and information reflected in the Financial Statements and whether they are in compliance with the terms and conditions of Project's Grant/ or Financing Agreements. We communicate with those charged with governance of the ministry regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance of the ministry with a statement that we have complied with relevant ethical 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 financial 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 mmad aiem Haqmal Auditor General Supreme Audit Office Page 3 of 3 Islamic Republic of Afghanistan Kabul Urban Transport Efficiency Improvement Project World Bank Reference: Project ID P131864; Grant ID 17061 Financial Statements for the year ended 30th Qaws 1397 (21st December, 2018) Kabul Urban Transport Efficiency Improvement Project World Bank Reference: Project ID P131864; Grant ID 17061 STATEMENT OF CASH RECEIPTS AND PAYMENTS FOR THE YEAR ENDED 30 QAWS 1397 (21 DECEMBER 2018) 1397 1396 Cumulative To Date Receiptsl Receiptsl Payments Payments Controlled by Controlled by entity entity USD USD USD RECEIPTS Initial Advance - 5,000,000 Direct Payments - - 1,481,890 Replenishments 20,236,250 10,767,975 54,782,580 TOTAL RECEIPTS 20,236,250 10,767,976 61,264,470 PAYMENTS Disbursement Category* Goods, Works, Non-Consulting Servcies, 17,435,831 11,142,261 58,506,024 Consultants' services, Training and Incremental Costs Bank Charges so 75 525 TOTAL PAYMENTS 17,435,881 11,142,336 58,506,549 Excess of Receipts over Payments 2,800,369 (374,361) 2,757,921 Taminat (Net) 644,002 (433,113) 2,177,680 Increase/(Decrease) in Cash & Cash Equivalents 3,444,371 (807,474) 4,935,601 Cash and Cash Equivalaents at the beginning of the year 1,491,230 2,298,705 Increasel(Decrease) in Cash & Cash Equivalents 3,444,371 (807,474) Cash and Cash Equivalents at the end of the year 4,935,601 1,49,230 The accompanying notes form an integral part of this financial statement. Zahi dar d eputy neI Ministry f nance, Isla epub c of Afghanistan Dated: December 8, 2019 Kabul Urban Transport Efficiency Improvement Project World Bank Reference: Project ID P131864; Grant ID 17061 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 QAWS 1397 (21 DECEMBER 2018) 1. LEGAL STATUS AND ACTIVITY a. The Kabul Urban Transport Efficiency Improvement Project was set up in April 2014 to improve road conditions and traffic flows on selected corridors of Kabul. b. The project is funded by grant number 17061 in the amount of USD 90,500,000 by the Afghanistan Reconstruction Trust Fund agreement for which was executed in April 2014. However, the said agreement provided for retroactive financing covering period from September 15, 2012 till the effectiveness of the grant. c. The project consists of the following parts: i. Road Infrastructure ii. Technical Assistance and Studies iii. 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 Project have been prepared in accordance with the requirements of the Grant Agreement for the referred to in the preceding paragraph that have been signed between the Islamic Republic of Afghanistan and the International Development Association acting as the administrator of the Afghanistan Reconstruction Trust Fund 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 grant(s) as specified in para 1(b) and encompass the operations of the project to the extent funded by those grant(s). c. Receipts These represent amount of funds received from the government towards retroactive financing. d. 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. 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. Kabul Urban Transport Efficiency Improvement Project World Bank Reference: Project ID P131864; Grant ID 17061 3. NOTES TO THE FINANCIAL STATEMENTS\ a. Initial Advance Initial advance represents the advance given by the World Bank into the designated account of the project. b. 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. c. 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. d. Bank Charges The Ministry of Finance has negotiated with Da Afghanistan Bank that bank charges will not be charged on the transactions in the US Dollar Special bank account of the grant. Bank Charges may be levied by intermediary banks on deposits into the Special Account and balances returned to the World Bank. e. 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, towards settlement of the claims, liabilities and contractual obligations against contracts and agreements for or reimbursement of 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 OPayments by Third Party" column in the statement of Cash Receipts and Payments. 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. h. Appendices The accompanying appendices provide additional information and analysis end 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. Kabul Urban Transport Efficiency Improvement Project World Bank Reference: Project ID P131864; Grant ID 17061 APPENDIX Al SUMMARY OF WITHDRAWAL APPLICATIONS FOR THE YEAR ENDED 30 QAWS 1397 (21 DECEMBER 2018) Initial Description Application Number Advance Amount USD USD DA-A 25 13,988,122 DA-A 24 6,248,127 f Kabul Urban Transport Efficiency Improvement Project World Bank Reference: Project ID P131864; Grant ID 17061 APPENDIX A2 US Dollar SPECIAL ACCOUNT SUMMARY FOR THE YEAR ENDED 30 QAWS 1397 (21 DECEMBER 2018) Account No: 27465 Depository Bank: Da Afghanistan Bank (DAB) Address: Kabul USD Opening Balance as per Bank Statement 1,502,564 Add: Replenisments 20,236,250 Total Additions 20,236,250 Deduct: Payments for Project Expenditure 16,791,829 Incorrect debits to this account 64 Bank Charges 50 Total Deductions 16,791,943 Closing Balance as per B.S 30 QAWS 1397 (21 DECEMBER 2018) 4,946,871 Kabul Urban Transport Efficiency Improvement Project World Bank Reference: Project ID P131864; Grant ID 17061 APPENDIX A3 US DOLLAR SPECIAL ACCOUNT RECONCILIATION FOR THE YEAR ENDED 30 QAWS 1397 (21 DECEMBER 2018) Account No: 27465 Depository Bank: Da Afghanistan Bank (DAB) Address: Kabul USD Closing Balance as per bank statement - 30 QAWS 1397 (21 DECEMBER 2018) 4,946,871 Add: Incorrect payment from this account - Cheque # 27465700166 64 Less: Exchange gain (to be transferred to Government Account) (11,334) Closing balance as per financial statements - 30 QAWS 1397 (21 DECEMBER 2018) 4,935,601 Kabul Urban Transport Efficiency Improvement Project World Bank Reference: Project ID P131864; Grant 10D 17061 APPENDIX A4 STATEMENT OF ESTIMATED GRANT AMOUNT FOR THE YEAR ENDED 30 QAWS 1397 (21 DECEMBER 2018) (Memorandum Statement- not an tmegrai part of the Fancial Statements) Amount In currency of commitment Amount of Grant USD 90,500,000 Amount disbursed by World Bank until the end of 13971 USD 61,264,470 Undisbursed Balance USD 29,235,530 In reporting currency Amount disbursed by World Bank until the end of 13971 USD 61,264,470 Equivalent US Dollars for undisbursed amount USD 29,235,530 Total estimated amount of Grant Funds available USD 90,500,000 Cumulative Payments for expenditure as per the Statement of Cash Receipts & Payments USD 56,328,869 1. Actual amounts of total disbursement made by the World Bank since the beginning of the project as available from Client Connection.