Financial Attest Audit Report on the Accounts of Economic Revitalization of Khyber Pakhtunkhwa & FATA G rant Agreement No. TF 099175 PK Funded by M4)TF/World Bank Financial Year2017-18 AudtorGeneral ofilPakistan Kslamiabad TALE OF CONTENTS LIST OF ABBREVIA 1 IONS ...................................................................................................i P R E F A C E ........................................................................ ...................................................... ii P Ä R T -[ ..................................................................................................................... ................. [P R 0 J CT OV I E R v l E W ...........................................................................................................2 se \I TOR'SIN E P R T O TI 1 1Z M ANAG E IENT (A IDIT OPINION)...............................3 FINANCIAL STATEM E1-NTS ........................................................................... 4 f. P A R T-11. -- . -....................................................................-- . ................-.................. 5 Co V E `R I N G L E, T T E` R T O TI 11E MNI\ N A G [A M Ii N T L E, T T VL R .................................,.......... ...... 6 E `X IC UV TI1 V E S I M M4N A R Y .....................................................................................................7 M\- A N A G E N'NT L ET T ER ...................................................................... ................................8 I. I N TR 0 D U1 C- T] 0 N ......................... I........................................................... .... .................9 2. Ä U D [T ( I kl C T'0 1V I `S ..................................................................................................... 9 3. I\ U D) T SCOP l A nu Xd M 1E1T 1 ODO LOG Y ........... I.............................................................9 4. AUDIT FINDINGSAND RECOM M ENDATONS.......................................................9 4.1 Organii ation wnd n age ment ........................................................................... 9 4.2 Financial M anagem ent...................................................................................10 4.2 Sstainbibilit2y ..................................................................................................... 12 4.3 Overall A\ssessment ........................................................................................... 12 ' CONCLUSION .............................................................................................,.............. I \ C K NO0W L- E DG V M I -N l ........................................................................................,............... 13 ,\KOLL.F[CF1 LIST OF ABBREVIATIONS as AGP Auditor General of Pakistan BDS Business Development Skills DRC Document Review Committee . ECNEC Executive Committee of the National Economic Council ERKF Economic Revitalization of Khyber Pakhtunkhwa FATA Federally Administered Tribal Areas FDWP FATA Development Working Party GRMC Grant Review and Monitoring Committee GOP Government of Pakistan IDA International Development Association IPSAS International Public Sector Accounting Standards ISSAls International Standards of Supreme Audit Institutions KP Khyber Pakhtunkhwa MDTF Multi Donor Trust Fund NOL No Objection Letter PMU Project Management Unit . PU Project Unit SME Small and Medium Enterprises SMEDA Small and Medium Enterprises Development Authority a il Page PREFACE Auditor General of Pakistan conducts audits subject to the Articles 169 and 170(2) of the Constitution of the Islamic Republic of Pakistan, 1973 read with Sections 8 and 12 of the Auditor-General's (Functions, Powers and Terms and Conditions of Service) Ordinance, 2001. The audit of "Economic Revitalization of Khyber Pakhtunkhwa and FATA (ERKF)" under Planning and Development Department FATA for the financial year 2017-18 funded by the Multi Donor Trust Fund through World Bank was carried out accordingly. Directorate General Audit (Federal Government), Islamabad conducted audit of the project during October, 2018 for the financial year 2017-18 with a view to reporting significant findings to stakeholders. Audit examined the economy, efficiency, and effectiveness aspects of the project. In addition, audit also assessed, on test check basis, whether the management complied with applicable laws, and rules and regulations in managing project. The Audit Report indicates specific actions that, if taken, will help the management realize the objectives of the project. The Report consists of two parts. Part-I contains Auditor's Report (Audit Opinion) and Financial Statements. Part-Il contains Executive Summary, Management Letter and Audit Findings. The Report has been prepared for submission to the International Development Association (IDA) in terms of Grant Agreement No. TF-099175 PK. Dated: 1 .12.2018 (MAQBOOL *HMAD GONDAL) Place: Islamabad DIRECTOR GENERAL %MHP PR EFACE Auditor General of Pakistan conduct audits subject to the Articies 169 and 170(2) of the Constitution of tie Islamic Republie of Pakistan, 1973 rend with Sections 8 and 12 of the Auditor-(ieneral's (Functions, Powers and Terns and Conditions of Service) Ordinance, 2001. The audit of -conoinic Revitalizatioi of Khyber Laklituiiinkhwa and FATA- under Planning and D)el)vclopient Department FATA Grant No. TF-099175 PK for the financial year 2017-18 funded by the MIulti Donor Trust Fund tlirougli World Rank was carried out accordingly. Directorate General Audit (Federal Government). [slamabad conducted audit of the project during October 2018, for the linancial year 2017-18 with a view to reporting signi Ceant findings to stakeholders. Audit examined Ilie economy. efliciency, and effectiveness aspects of the project. In addition. audit also assessed, on test check basis, whether Ilie managernent complied with applicable laws, and rules and regulations in managing project. The Audit Report indicates speci li nctions that i taken, will help the management realize the objectives ol the project. The Report consists of two parts. Part-[ contains Auditor's Report (Audit Opinion) and Financial Stateiiients. Part- Il contai s 1 ixeeutive Sumniary, Management Letter and Auidit Fi nd ings. Tlie Report has been prepared for subiission to the International Developnent Association (IDA) in ternis of Grant Agreement No. TF-0991 75 PK. Daled: .12.2018 (NIAQBOOL A11MAD GONDAL) Phlce: Islamabad DIRECTOR GENERA fle PA RT-J 1. PRO.IECT OVERVIEW 2. Al DITOR'S REPIORT TO Til E MANA(GEN IENT 3. FINANCIAI, STATEINT e En PROJECT OVERVIEW Name of Project: Economic Revitalization of Khyber Pakhtunkhwa and FATA Sponsoring Authority: International Development Association (IDA) Executing Authority: Project Management Unit, Economic Revitalization of Khyber Pakhtunkhwa and FATA Grant Agreement No: TF 099175 PK Project Cost: Rs. 1395.9 million Date of Commencement: July, 2011 Date of Completion: June, 2020 (As per PC-I): Progressive Expenditure Rs.1,184,083 For 2017-18: 2| ag an a am AUDITOR'S REPORT TO THE MANAGEMENT Mr. Muhammad Faisal Project Director Economic Revitalization of KP & FATA 2nd floor, Zai Apartments Warsak Road, Peshawar Auditor's Report on the Economic Revitalization of Khyber Pakhtunkhwa and FATA Financial Statements We have audited the accompanying financial statements of the Economic Revitalization of Khyber Pakhtunkhwa and FATA, Grant No. TF 099175 PK under the Planning and Development Department, FATA that comprises Statement of Receipts and Payments together with the Notes forming part thereof for the year ended June 30, 2018. Management's Responsibility It is the responsibility of the project management to establish and maintain a system of internal controls, and prepare and present the Statement of Receipts and Payments in conformity with the requirements of Cash Basis IPSAS Financial Reporting under the Cash Basis of Accounting Standard. Auditor's Responsibility The responsibility of the auditor is to express an opinion on the financial statements based on the audit conducted. We conducted audit in accordance with the International Standards of Supreme Audit Institutions (ISSAIs). These standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free of material misstatements. The audit process includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. It also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall statement presentation. We believe that our audit provides a reasonable basis for our audit opinion. Opinion In our opinion: a) The financial statements present fairly, in all material respects, the cash receipts and payments by the project for the year ended June 30, 2018 in accordance with Cash Basis IPSAS Financial Reporting under the Cash Basis of Accounting Standard. b) The expenditure has been incurred in accordance with the requirements of legal agreements. (Maqbool Al(had Gondal) Director Ger#ral Directorate General Audit (Federal Government) Benevolent Fund Building, Zero Point, Islamabad Dated: k0.12.2018 31 Page 劍目 個中 個目 間牌 - 間口 ,l?INAN（了l』＼Lk!&A&!,l·乙入11,：入’-& 個自 細團 個團 自勿 細由 個由 細目 個口 系口 - 個口 。！ 個細 PROJ VCTNIA NAG I-MENT UNIT ECONOMIC REVITLAIZATION OF KHYBER PAKHTuNKIIWA AND FATA (FATA SHARE) STATE,NIENTOF CASI I RECEIPTS AND PAYMENTS FORTHE YEAR ENDVI) JUNF30,20IN Note 2017-18 2016-17 Reccipts(Payments) Payment byThird Rcceipts(Paymen(s) Payment by Third Controlled by Project Parties Controlled by Project Parties Pak Rupees RECEIPTS MDTF-World Bank 05 1 F 3,472,94211 1 TOTAL RECEIPTS 3,472,942 PAYMENTS DURINGTHE YEAR Grants 06 3,50U00 Investment Promotion 07 Capacity Building 118 - 22,951,635 Incremental Operating Costs 09 1,194,083 16,748,690 I`OTAI, PAVNIENTS 1,184,083 43,200,325 Increase /(Decrease) in Cash (1,184,083) (39,727,383) Cash at Beginning of Year 1,22H,l 13 40,955,496 Cash at End of Year 10 44,030 1,228,113 tin The accompanying notes form an iritcTgral pan of (hose Financial statenients and are to be read therewith. Aoject,6irector -.J q1tector Aaflat 'IpShVOT PROJECT MANAGEMENT UNIT ECONOMIC REVITLAIZATION OF KHYBER PAKHTUNKHWA AND FATA (FATA SHARE) STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS FOR THE YEAR ENDED JUNE 30,2018 Note 2017-18 2016-17 ko Budgeted Actual Amount Budget Actual Amount Amount Amount Pak Rupees RECEIPTS MDTF - World Bank 05 lj3,472,942 - TOTAL RECEIPTS - - 3,472,942 PAYMENTS DURING THE YEAR Grants 06 - - 21,106,500 3,500,000 i Investment Promotion 07 - - 10,900,000 - Capacity Building 08 - - 111,564,768 22,951,635 Incremental Operating Costs 09 10,062,720 1,184,083 15,391,530 16,748,690 TOTAL PAYMENTS 10,062,720 1,184,083 158,962,798 43,200,325 The accompanying notes form an intergral part of these financial statements and are to be read therewith, PCDe Proj!qiroctor PROJECU MANAGEMENT UNIT ECONOMIC iEVITLAIZATION OF KHYBER PAKIITUNKIIWA AND FATA (FATA SHARE) NOTES TO THE FINANCIAL STATENIENTS FOR THE YEAR ENDED JUNE 30, 2018 1 ENTITY AND ITS LEGAL STATUS The financial statements are for Economic Revitalization of KP & FATA (ISRKF) - FATA Share project. The Project has been conceived as an emergency response program under MDTF assistance for economic revival in Khyber Pakhtunkhwa and Federally Administered Tribal Areas (FATA) severely affected by militancy and devastating floods / unprecedented floods / torrential rains during 2010, playing havoc across the area with the businesses and livelihood activities, The Project is implemented under overall supervision of FATA Secretariat and PMU has heen housed at Directorate of Projects (DoP) FATA Secretariat Warsak Road Peshawar. Financing A grant of USD 20.00 million was approved by MDTF, out of which FATA Share conies to USD 6.6 million. The Project related agreements were signed on October 11, 2011 bearing Grant TF 099175 PK. The project became effective from July 2011 with the closing date ofJune 30, 2015 extended upto March 31,2017 and subsequently extended upto June 30, 2020. Responsible Agency A primary responsibility for overall progress and management of financing bas been entrusted to FATA Secretariat. 2 Cerlification by Project Management on Application of Funds The management of Economic Revitalization of KP & FATA (ERKF) project certifies that the funds have been applied/expenditure have been incurred for the purposes intended in the financing agreement. 3 Accounting Convention and Statement of Compliance These Financial Statements have been prepared in accordance with Cash Basis International Public Sector Accounting Standards (IPSAS), Financial Reporting under the Cash Basis of Accounting standard. The accounting policies have been applied consistently throughout the period. 4 Significant Accounting Policies 4.1 Reporting Currency All amounts in the inancial statements are in Pak Rupees. 4.2 Revenue Recognition Revenue is recognized on the date of receipt of money by bank or clearance of cheque. Revenue is recognized on gross basis and any related costs are recorded separately 4.3 Recognition of Expenditure Expenditure is recognized on the date when payment is made or cheque is issued. Financial year to which the payments pertain is determined by the date on which a cheque or payment advice is issued. 4.4 Foreign Currency Transactions Cash receipts and payments arising from transactions in foreign currencies are recorded in Pak Rupee by applying to the f ign currency amount, the exchange rate between the Pak Rupee aud the Foreign Currency at the date of the receipts and paymA ts Exchange differences arising on settlement of these transactious are recognized in the Statement of Receipts and payme Project Directbf a bi PROJECr MANAGEMENT LNIT m ECONOMIC REVIILAIZAION OF KIlYnER PAKHlTIUNKIIWA AND FATA (FATA ShARE) NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE30, 2018 5 External Assistance Extermal assistance was received in the form of Credit from the World Dank under financing agreement dated October 11. 2011 between the World Bank and Government of Pakistan (GOP) for the purpose of the Economic ReviLalization of KP & FATA (ERKF) Project The following amoants were received by Lhe Project during the period. 2017-18 2016- 17 us S Pak Rupees US S Pak Rupres SOE Procedures 5 I - - 33,163 3A72,942 - - 33,163 3,472,942 5.1 This represents inds transferred to the ERKF Projects Designated US Dollar Bank Account bearing number A- 82 (22534-7) by the World Bank on ihe basis of Withdrawal Applications submitted by the Ploject. 5.2 There has been no instance of eon compli ance witLh the terms and conditions of the financing agreement between ihe World Bank and GoP which have resulied in cancellation of Credit. 5.3 Uidrawn Esternal Assistance Undrawn Credit represent amounts specified in the financing agreemeritbetween the World Bank and GOP that he World Bank will disburse for ERKF project purposes 2017-18 2016- 17 Note Amounts in US S Closing Balance 48,642 59,948 48,642 59,948 6 Grants 2017-18 2016- 17 Note Amounts in Pak Rupees Rehabilitation Grants - 3.500,000 Up-gradairon Grants Business Development Support Grants 7 Invesiment Mobilization 2017-18 2016-17 Note Amounts in Pak Rupees Reconnect Pakistan Pre-feasibility of Diaspora Bond Investment Road Show( International) Investment Road Show (National) Evaluation of Pro-feasibility sttdy of FIB 8 CapacityBuilding 2017-18 20t6-17 Note Amounts in Pak Rupees Capacity Building of Counterpart Institutions a INPublC Private Dialogue - 22.951.635 Institutionalizing Investment Promotion - - - 22951 635 a 9 Incrementil Operating CosIs fl2017-I8 2016 -17 Note Amounts in Pak Rupees Remuneratiun and Salaries 9.1 885,120 13,641.960 OfTice Equipmenl - Contingent Expenditure 298,93 3,106,730 1,184,083 16,748,690 9.1 Remnrtioun and Sniaries 2(117-18 2016- 17 Ammintm in Pak Rupees Remneration- Specialistsindividual Consultants 792,000 12,840,000 Salanbes- Staff 93,120 801,960 885,120 13,641,960 10 Cash And Bank Amounta in Pak Rupees Cash at Bank 44,030 .228,113 44,03 1,228,113 1 l Authorization for 1ssue These finaneial satements have been auihoried for issue by the Project Dirccwr on --- 12 General Figures have been rounded olfto the nearest rupec Preject i tor - Ml tøm kliljr