The Republic of the Union of Myanmar The Office of the Auditor General of the Union Letter No. Sa Hsa 8/ World Bank (108/ 2019) Date: 29 March 2019 To Union Minister Ministry of Education Subject: Audit report and management letter Re: The addressee’s Official Letter No. Finance (DFSP)/ 2018 (18409) dated 21 November, 2018 1. According to the reference above, the Union Minister’s Office of the Ministry of Education sent the financial statements of Department of Basic Education to us and requested to audit those financial statements. Thus, we have audited the financial statements of the Decentralizing Funding to School Project financed by the World Bank, AusAID and MoE’s budget which provided school grants and stipends to basic education schools for 2017-2018 FY. 2. The audit report and management letter are enclosed here for further action as necessary. Audit findings from Chin State and Bago Region are not currently included and these will be sent to you later. Enclosure: 1. Audit finding report (4 copies) 2. Management letter (63 copies) On behalf of Auditor General Naing Thet Oo (Permanent Secretary) Cc: - Director General (Department of Basic Education) - Office file - Dispatch THE REPUBLIC OF THE UNION OF MYANMAR THE OFFICE OF THE AUDITOR GENERAL OF THE UNION AUDIT DEPARTMENT AUDIT REPORT ON THE DECENTRALIZING FUNDING TO SCHOOLS PROJECT FINANCED BY THE WORLD BANK IDA CREDIT, AUSAID GRANT AND MYANMAR GOVERNMENT BUDGET IMPLEMENTED BY DEPARTMENT OF BASIC EDUCATION, FOR THE 2017-2018 FISCAL YEAR Date: 29 March, 2019 Contents Audit Para Page Particulars From To From To 1 2 3 4 5 6 1 Introduction 1 2 1 - 2 Project background 3 - 1 2 3 Management’s responsibility for financial statements 4 - 2 - 4 Auditor’s responsibility 5 - 2 - 5 Audit Opinion 6 - 2 4 Audit report on project financial statements of the Decentralizing Funding to Schools Project (DFSP) implemented during 2017-2018 FY by the Department of Basic Education (DBE), financed by the World Bank’s loan, AusAid grant and Ministry of Education budget for the year ended March 31, 2017 Introduction 1. According to the request of Ministry of Education, we have audited the financial statements as at 31 March, 2018 of the Decentralizing Funding to Schools Project (DFSP) financed by the World Bank’s loan, AusAid grant and Ministry of Education budget implemented during 2017-2018 FY. During the course of the audit, we requested and reviewed the information and evidence provided through the auditing process for reviewing and evaluation on material misstatements and deficiencies related to figures and assertions of quantitative conditions of the financial statements and presentations. 2. In this report, the consolidated findings submitted by Townships are presented. According to the report submitted by the Office of the Auditor General of Yangon Region, we were informed that the auditing process could not be carried out in Kokokyun Township (Yangon Region) because of inconvenient transportation. We have not received audit findings in time from Chin State due to geographical difficulties and inconvenient transportation, and also from Bago Region due to late submission of audit findings by audit team and verification. Therefore, we could not present those findings in this report. We will share them later when we receive. Project Background 3. Since 2014-2015 FY, the Ministry of Education in coordinating with the World Bank has implemented the Decentralizing Funding to Schools Project financed by US$ 80 million from the World Bank IDA Credit No. 5455-MM, US$ 20 million from AusAID TF 017814 (in total US$ 100 million), and also Myanmar government’s contribution from its budget. As loan from the World Bank, US$ 56,972,291 for the period of 2014-2015 FY to 2016-2017 FY and US$ 16,399,006.50 for 2017-2018 FY, totally US$ 73,371,297.50; as grant from Aus AID, US$ 11,789,840 for the period of 2014-2015 FY to 2016-2017 FY and US$ 3,359,854 for 2017-2018 FY, totally US$ 15,149,694 have been received. Management’s responsibility for the financial statements 4. The project management has the responsibility to prepare financial statements in accordance with the project accounting standards which included in the Project Financial Management Manual, and Generally Accepted Accounting Principles. It also has the responsibility to make those financial statements free from material misstatements, whether due to fraud or error and to maintain a strong system of internal control. Auditor’s Responsibility 5. The auditor has the responsibility to plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatements, and to express an appropriate audit opinion on the financial statements based on audit findings in accordance with generally accepted auditing standards and in compliance with ethical requirements. Audit Opinion 6. In our opinion, the financial statements of the Decentralizing Funding to Schools Project for the year ended 31 March 2018 have been prepared in accordance with specified accounting methods except the following findings that may require adjustments. (A) Though the actual use of school grant was MMK 22,323.862 million (US$ 16,399,003.50), MMK 22,023.147 (US$ 16,398,471.00) calculated according to the World Bank’s formula was shown in column 3 and 5. Thus, MMK 0.715 million (US$ 532.50) was understated. (B) Though the actual use of stipend was MMK 4,512.284 (US$ 3,359,854), MMK 4,512,201 million (US$ 3,359,792) calculated according to the World Bank’s formula was shown in in column 4 and 6. Thus, MMK 0.083 million (US$ 62) was understated. (C) Financial statements must be submitted within 3 months after the end of fiscal year, however, the submission of those statements was late about 5 months. (D) When the expenditures were examined, it was found that the expenditures of School Improvement Fund and School Grant accounts exceeded than the required amount. The excess amount was MMK 30.927 million and MMK 29.835 million has been refunded to OA account. In Kachin State, MMK 1.092 million has not been refunded yet. (E) Regarding School Improvement Support Program, the followings are not in compliance with operational guideline. 1. Spending funds for the expenses which are not relevant to 13 budget codes 2. Not opening separate bank accounts 3. Late distribution of school grants 4. Advance spending before receiving funds. 5. Incomplete expense vouchers 6. Lack of expense vouchers (F) The followings are findings which did not comply with Operational Guidelines for Student Stipends Program. 1. Not allocating stipends in a specific time line 2. Unnecessary withdrawal of funds from Withdrawal Account and depositing to current account 3. Remaining funds to be refunded to the state 4. Not distributing stipends in a specific timeline Khaing Khaing Aung Director General Date: March, 2019