TABLE OFCONTEXTS Page No. Preface Abbreviations & Acronyms 1 PART - I Project Overview 01 Auditor's report to the Management (Audit Opinion) 02 Financial Statements 03 PART - ll MANAGEMENT LETTER 08 EXECUTIVE SUMMARY 09 SECTIONS 1. INTRODUCTION 10 2. AUDIT OBJECTIVES 11 3. AUDIT SCOPE AND METHODOLOGY 11 4. AUDIT FINDINGS AND RECOMMENDATIONS 12 4.1, Organization and Management 12 4.2 Financial Management 13 4.3 Procurement and Contract Management 14 4.4 Monitoring and Evaluation 17 4.5 Overall Assessment 19 5. CONCLUSION 21 ACKNOWLEDGMENT 23 ANNEXES (A) 24 Bank Statements (Annex-B) 25 PREFACE The Auditor-General conducts audit in terms of 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 [he audit of Karachi Neighborhood Improvement Project (KNIP), Government of Sindh flnded by IDA Loan No.622-PK , was carried out accordingly. The Directorate General Audit Sindh Karachi conducted audit of the Karachi Neighborhood Improvement Project (KNIP), Planning and Development Department, Government of Sindh funded by IDAlnan No. 622-PK during October 2018 for the Financial Year 2017-18 with a view to report significant findings to stakeholders. Audit examined the economy, cfficiency, and effectiveness aspects of the Karachi Neighborhood Improvement Project (KNIP). In addition, Audit also assessed, on test check basis whether the management complied with applicable laws, rules, and regulations in managing the project. The Audit Report indicates specific actions that, if taken, will help the management realize the objectives of the project. The audit observations included in this report have been finalized in the light of discussion in Exit Conference meeting. The Report consists of two parts. Part-I contains Auditor's Report (Audit opinion) and Financial Statements. Part-li contains Executive Summary, Management Letter and Audit Findings & recommendations. The Audit Report has been prepared for submission to the World Bank in terms of Loan Agreements, Loan No. 622-PK (Liaq iat Ali Nlemoc Dir etor General Dated: /11/2018 Place: Karachi Abbreviations & Acronyms AGP Auditor- General of Pakistan ECNEC Executive Committee of the National Economic Council FABS Financial Accounting and Budgeting System GoS Government of Sindh ICB International Competitive Bidding IDA International Development Association . INTOSAL International Organization of Supreme Audit Institutions LGD Local Government Department NCB National Competitive Bidding PCi Planning Commission Proforma I PD Project Director PlU Project Implementation Unit P&DD Planning and Development Department PKR Pakistan Rupees POL Petrol, Oil & Lubricants SDR Special Drawing Rights II1 I' 'i 3 PART - I r [ - Project Overview Karachi Neighborhood Improvement Project Project Title:(KNIP) Sponsoring Authority World Bank Borrower Islamic Republic of Pakistan Planning and Development (P&D) Department, Executing Agency Government of Sindh through Project Implementation Unit (PSU) IDA Loan Numbers: 6022-PK Implementing Agency Karachi Neighborhood Improvement Project PC-I Cost (Program) $98 million Date of Loan Signing 26th July,2017 Project Implementation Period 54-months Date of Completion 30th November,2021 Date of approval from ECNEC October 24, 2008 Loan Utilization status in F.Y 2017-18 279.057 million UDITOR'S REPORT TO THE MANAGEMENT We have audited the statenent of receipts and paymrients, statement of budget and enditure and statement of cash balance of Karachi Neighborhood Improvement Project N11P) financed under the World Bank Loan No.622-PK as at 30 June, 2018 for the year then ed. The financial statements are the responsibility of the rnanagement. Our responsibility is to ress an opiion on these financial statemenits based on our audit in accordance with the uirements of Article 169 of te Constitution of the Islarnic Republic of Pakistan read with ction 7 of the Auditor--General's (Functions, Powers and Terms and Conditions of Service), dinance, 2001. We conducted our audit in accordance with the atditing standards issued by tc ernational Organization of Supreme Audit Institutions (SAIs) and by our Department. Those ndWards require that we plan and perform audit to obtain reasonable assurance whether the -ncial statements are frec of material misstatement. Audit includes examining on a tcst basis, dence supporting the amount and disclosures in the financial statements. Audit also ineludes essing the accounting principles used and significant estimates made by lie Government, as 11 as evaluating the overall financial statement presentation. We believe that our audit provides Lsonable basis for our opinion. In our opinion: These financial sratements properly present, in all material respects, the financial position of the Karachi Neighbotrhood Improvement Project (KNIP) Financed uinde. the World Bank Loan No. 622-PK as at 30 June, 2018S and the results of its operations, its cash flows and its expenditure and receipts by appropriation for the year then ended in accordance with the stated accounting policies of the Government of Pakistan. The sums expended have been applied, in all material respects, for the purposes authorized by Padiament and have, in all material respeets, been booked to the relevant grants and appropriations. ted: If -2018 (LiaqQmt Ali Memoå) cc: Karachi Diector General