Office of the Special Sectors Audit Wing Constitution Avenue Islamabad No. SSAW (FAP/Sindh/F-14 /26o. Dated: /-03-2019 1. Mr. Abid Khan, Representative World Bank, 20-A, Shahrah-e-Jamhuriat, G-5/, Islamabad. Subject: FINANCIAL ATTEST AUDIT REPORT ON ACCOUNT OF FOREIGN AIDED PROJEC]TS "SINDH IRRIGATED AGRICULTUREPRODUCTIVITY ENHANCEMENT PROJECT(SIAPEP) FOR FINANCIAL YEAR 2017-18. Kindly refer to your email letter dated 30'h January. 2019 on the subject. 2. The Director General Audit (Sindh), Karachi has furnished rectified Financial Attest Audit report of the following Foreign Aided Project (FAP): S. # Name of Project Loan No. Development Partner I Sindh irrigated Agriculture Productivity Enhancement Project (SIAPEP). Hyderabad. 5604-PK World Bank 3. Financial Attest Audit report of the above mentioned project is hereby re-submitted as desired for further necessary action at your end. Enclosures: As above Dr Jaw Zaka Khan Director SSA Copy for information to: 1. DAG (South). Karachi. 2. DG Audit (Sindh),Karachi, with the request to issue a copy of the above report to the Project Management for their further necessary action. 3. Master File Financial Attest Audit Report on the Accounts of Sindh Irrigated Agriculture Productivity Enhancement Project (SIAPEP), Hyderabad World Bank-assisted Loan No. 5604-PK * Agriculture, Supply & Prices Department Government of Sindh for the Financial Year 2017-18 Auditor-General of Pakistan TABLE OF CONTENTS Page No. Prefac ei Abbreviations and Acronyms iI PART - I Pro ject Overview 01 Auditor's Report to tlie Management 02 Finaneal Statements 03 PART - Il COVER LETTER T0 THE MANAGEMENT LE~TER 13 EXECUTFIVE SUMMARY 14 MANAGEMENT LETTR 16 1. INTRODUCTION 16 2. AUDIT OBJECTIVES 17 3. AUiI S OPE AND MET1 IODOLOGY 17 4. AUDl I FINDINGS AND RECOMMENDA HONS 17 4.1 Linaneiil management 18 4.2 Civil & Construction Works 24 4.3 Overall Assessment 26 5. CONCLUSION 27 ACKNOWLEDGENIENT 28 Sindh Irrigated Agriculture Productivity Enhancement Project (SIAPEP) IDA Credit No. 5604-PK Statement of Cash Receipts and Payments For the Year Ended June 30, 2018 Notes FY 2017-18 FY 2016-17 Receiptsi Receipts] (Payments) Payments by (Payments) Payments by Controlled by Third Parties Controlled by Third Parties Project Project Pak Rupees RECEIPTS External Assistance - IDA World Bank 5 2,580,452,307 - 1,839,399,604 GOS (Salaries to the Regular Staff) 6 - 115,285,153 - 908,439,960 TOTAL RECEIPTS - A 2,580,452,307 115,285,153 1,839,399,604 908,439,960 LESS: PAYMENTS Civil Works 7 1,447,449,880 - 1,459,882,080 - Goods 8 160,379,052 - 230,724,873 Consultancy Services 239,241,920 - 207,233,272 Trainings 10 4,823,333 -- Incremental Operating Cost 11 267,939,262 6,799,000 211,747,302 760.170,876 TOTAL PAYMENTS 2,119,833,447 6,799,000 2,109,587,527 760,170,876 460,618,860 108,486,153 (270,187,923) 148,269,084 Increasel (Decrease) in Cash 460,618,860 108,486,153 (270,187,923) 148,269,084 Cash at Beginning of Year 1,042,809,663 - 1,312,997,586 Balance Surrendered/Lapsed-GOS (108,406,153) -148,269,084) Cash at End of Year 12 1,503,428,523- 1,042,809,663 The accompanying notes form an integral part of these financial statements. Project Director C" -SIAPEP Hyderabad Sindh Irrigated Agriculture Productivity Enhancement Project (SIAPEP) IDA Credit No. 5604-PK Statement of Comparison of Budgeted and Actual Amount For the Year Ended June 30, 2018 Amount in Pak Rupees Amount in Pak Rupees Notes FY 2017-18 FY 2016-2017 Budgeted Actual Amount Budgeted Actual Amount Amount (PC-1) Amount (PC-1) RECEIPTS External Asistance - IDA World Bank 5 3,191,050,000 2,580,452,307 2,907,060,733 1,839,399,604 GOS (Salaries to the Regular Staff) 6 940,011,000- 1,019,999,376 908,439,960 TOTAL RECEIPTS - A 4,131,061,000 2,580,452,307 3,927,060,109 2,747,839,564 LESS: PAYMENTS Civil Work 7 1,671,910,000 1,447,449,880 1,366,700,000 1,459,882,080 Goods 8 804,400,000 160,379,052 713,960,000 230,724,873 Consultarcy Services 9 147,840,000 239,241,920 175,040,000 207,233,272 Trainings 10 202,140,000 4,823,333 336,930,000 Incremental Operating Cost (IDA) 11 1,304,771,000 267,939,262 1.334,430,109 211,747,302 TOTAL PAYMENTS - B 4,131,061,000 2,119,833,447 3,927,060,109 2,109,587,527 Increase (Decrease) in Cash (A-B) - 460,618,860 - 638,252,037 The accompanying notes form an integral part of these financial statements- Ix PU-S ect Director PWA PEP Hyderabad Sindh Irrigated Agriculture Productivity Enhancement Project (SIAPEP) IDA Credit No. 5604-PK Notes to the Financial Statements For the Year Ended June 30, 2018 1 - Reporting Entity: The Financial Statements are for Sindh Irrigated Agriculture Productivity Enhancement Project (SIAPEP). The financial statements encompasses the reporting entity as defined in the Financing Agreements between the Islamic Republic of Pakistan and the World Bank for the SIAPEP. The Financing agreement (IDA Credit No. 5604-PK) of Special Drawing Rights (SDR) 132,700,000 was signed on July 09, 2015 and the closing date is 31st Dec 2021. The objective of the Project is to improve irrigation water management at tertiary and field levels in Sindh. 2- Certification by Project Management on Application of Funds: It Is certified that funds against Credit No, 5604-PK have only been utilized for the project purposes as defined in the financing agreement 3 - Accounting Convention and Statement of Compliance: The Financial SLatements of SIAPEP have been prepared in accordance with International Public Sector Accounting Standards (IPSAS), Financial Reporting under the Cash Basis of Accounting. These financial statements have been prepared using cash basis of accounting where transactions are only recognized when cash is received or paid. 4- Significant Accounting Policies: The significant accounting policies applied in the preparation of these financial statements are set out below, 4.1 Foreign Currency Transaction : Cash receipts and payments arising from transactions in foreign currencies are recorded in Pak. Rupees by applying to the foreign currency amount, the exchange rate applied by State Bank of Pakistan (SBP) for converting foreign currency into Pak. Rupees for the tranche at the time of receipt of funds in SBP from donor- 4.2 Reporting Currency : Amounts in the financial statements are in Pak Rupees. 4.3 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, 4.4 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. 4.5 Fixed Assets: Fixed Assets )Supplies and consumables are stated at cost. The further details of procurement are: 2017-18 2016-17 Transport 6,112,000 15,680,000 Computers & IT Equipments - 3,99 498 Office & Field Equipments 4,932.610 17.623,039 Furniture & Fixture 12224,151 570,703 23,268,761 37,863,240 5- External Assistance - IDA World Bank: External assistance will be receipt in the form of Credit from the IDA World Bank under financing agreement dated 09-07- 2016 between the World Bank and Govarnment of Pakistan (GOP) for the purpose of the SIAPEP. The following amount was received by the end of reporting period This fund was transfered into the Designated Bank Account (Alc # 4096293208 (FE,23)) being maintain at National Bank of Pakistan Fatima Jinnah Road Hyderabad. FY 2017-18 Amount Convertion Rate Amount Credited (US$) used Into NBP (PKR) 5,284,921 105.3555 556.795,494 4,708,919 110.3608 519,633,450 5,815,545 110.4937 642,581,085 7,162,820 120-2658 861,442,278 22,972,205 2,580,452,307 6- GOS (Salaries to the Regular Staff) - The particular line item represents salaries to the regular staff, who are being engaged by the GoS for the purpose to complete project targets The staff rneans, a designated regular staff working in project areas throughout Districts and Field offices already working against a strength of regular positions and delegated to work under SIAPEP ln order to facilitate and fulfill the developmental objectives Details are as follows FY 2017-18 FY 2016-17 Salaries 115,285,153 908,439,960 7 Civil Work The details of payments made during FY 2016 17 and FY 2017-18 under civil works are as follow: FY 2017-18 FY 2016-17 Receipts/ Receiptsl (Payments) (Payments) Controlled by Controlled by Project Project Community Water Course Improvement Civil Work 1,447.449,880 1.459,882,080 Mitigation Flood Risk for the Poor - Civil Work Total 1,447,449,880 1,459,882,080 Community Water Course Improvement-Civil Work: Sub-Component Al will assist Government of Sindh efforts to: improve and rehabilitate tertiary distribution level water courses. Activities under this component will include farmer mobilization, establishment of Water Course Associations (WCAs) and their registration, survey and design, and construction. About 5,500 water courses will be improved through the provision of lining (corresponding to 30 percent of water course length). The farmers will co-finance 24 percent of the costs through provision of skilled and unskilled labour. Mitigation Flood Risk for the Poor-Civil Work: Sub-Component A2 will increase the resilience of the rural poor to floods through the strengthening of flood mitigation measures, including the establishment of shelters. It will finance the provision of approximately 380 permanent flood shelters of three types in the seven most vulnerable districts in the irrigated areas of Sindh to increase their resilience to water related disasters such as flooding and heavy rains. Land for construction will be largely public or community owned land located in non-cultivable areas, preferably on higher ground. Once constructed, these shelters will be transferred to the Provincial Disaster Management Authority (PDMA) and their affiliates at the district level for operations and maintenance; some will be used for community activities. 8 Goods Following Payments are covered under Goods in additional of fixed asset covered under note 4.5 FY 2017-10 FY 2016-17 ReceiptWl Receipts/ (Payments) (Payments) Controlled by Controlled by Project Project Small and Medium-sized HEIS Farms (2-10 ha) - Goods 22,095.639 3,106,983 Kitchen Garden HEIS kits - Goods Laser Land Leveling & Deep Plowing - Goods 115,014.652 189,754,550 Deep Ripping - Goods Transport 5,112.000 15,680,000 Computers & iT Equipments - 3,989,498 Office & Field Equipments 4.932,610 17,623,039 Furniture & Fixture 12,224,151 570,703 160,379,052 230,724,873 0V Small and Medium-sized HEIS Farms (2-10 ha) - Goods Sub Component 81 installation of HFIS drippers and bubblers for growing high value crops on irrigated and irrigable land: provide technical assistance packages to farmers on operations and maintenance of HEIS; and provide additional training and assistance to farmers in the use of HEIS by specialists and consultants. Approximately 2,600 HEISs will be installed on 14,300 ha (35,000 acres) of irrigated and irrigable land. HEIS will be provided (on demand) to the farmers on a 40 percent cost sharing basis. They will be installed by Sales, Supply and Service companies (SSCs) who will also provide a technical assistance package for the farmers in operation and maintenance of the system. Additional training and assistance will also be provided by the HEIS specialist in the field teams assisted by the technical assistance and training (TAT) consultants Kitchen Garden HEIS Kits - Goods Sub-component B2 ( 32a. & F32b.) will support the distribution of kitchen garden HEIS kits, consisting of drip irrigation equipment to female-headed households and landless farmers It will include the distribution of approximately 10,000 kitchen garden HEIS kits consisting of drip irrigation equipment for a plot of 1Dm x 10m, including a small water storage of 160 liter with a conveyance pipe for the daily provision of water. There is no payment has been made during FY 2016-17 and FY 2017-18 under this Sub components. Laser Land Leveling & Deep Plowing - Goods : Sub-Component Cla was initially budgeted to provide 1100 laser guided land leveling equipment to the famers to facilitate training in the use of these equipment These equipments help farmers to save irrigation water, curtail irrigation time, improve efficiency of agriculture inputs such as fertilizers, and achieve uniform seed germination, resulting in increased crop yields. During the Financial Year 2016-17 and 2017-18, the total number of laser equipment distributed were 665 and 401. FY 2017-18 FY 2016-17 Company No. of Units Amount (PKR) No. of Units Amount (PKR) Bahawal Engineering Kamoke 3 496,501 4 972,000 Cross Field Agro 76 22,219,363 - Falcon Traders Lahore 8 2.259,818 12 3.402,000 Farm Power International Lahore 167 47,720.250 647 184.880,250 Millat Farm Machinery 2 576.000 - - Millat Tractor Limited 2 520,020 - - Pioneer Agro 143 41,222,700 1 224,550 Public Drawing Stationery Store - - - Al-Technique Corporation of Pakistan - - 1 275,850 Grand Total 401 014,62 66 189,754,650 Deep Ripping - Goods There is no payment has been made during FY 2016-17 and FY 2017-18 under this Sub components. 9 Consultancy Services Following consultancies are covered under the project ________1_F_2061 FY 2017-18 FY 2016-17 Receipts Receiptst (Payments) (Payments) Controlled by Controlled by Project , _ ProJect Supervision and Implementation Assistance Consultants (PSIAC) 142,327,886 90,501,516 M&E of Project impact Consultants 76,610.128 105,784,671 Technical Assistance & Training Consultants (TATC) 4,533,840 Indiviual Consultants 15,770.066 10,947,085 Total 239,241920 207 233272 g piu-SWP J P"* ~~¾,. ($J, A3-Supervision and Implementation Assistance Consultants (PSIAC) - Consultancy Services: MIs.Crescent Consultants Consortium (In JV with Hydro-Plan & Grupotec) Lahore were hired as a Supervision and Implementation Assistance Consultants (PSIAC) and contract agreement for PKR 939,729,400/- has been signed on February 02, 2016 between the Project Director PlU SIAPEP PSIAC will assist the Project Implementation Unit (PIU) in construction supervision, engineering and designs, procurement, financial management, quality control, and the timely completion of strategic studies and pilot projects. C4-Technical Assistance & Training Consultants (TATC) - Consultancy Services Sub-Component C4 will provide Technical Assistance and 1 raining (TAT) Consultants to provide training to field teams, public sector staff and farmers in HEIS installation, operation and repair, crop diversification, crop production under HEIS, soil measurement and fertilizer application, and to support piloting of activities under Sub-component B2 and training of trainers for operators in laser land leveling and deep ripping under Sub-Component C2a. the contract has been awarded as part of the PSIA consultancy servcies to MS Cresent Consultant Consortium with addendum of additional cost amocunting to PKR 67,874,753 D1- M&E of Project Impact Consultants - Consultancy Services M/s Centre for Social Research & Development Lahore (In JV with ADA Consultants Inc Canada ) were hired as a Monitoring and Evaluation Consultants (M&EC) and contract agreement for PKR 477,142,000/ has been signed on June 16,2016 between the Project Director PIU SIAPEP M&EC will provide support for project monitoring and evaluation and carrying out impact assessments 10 Trainings 20 FY 2017-18 FY 2016-17 Receiptsl Recelptst (Payments) (Payments) Controlled by Controlled by Project Project C. Improved Agriculture Practices a Establishing Farmers' Field Schools 2,253.733 b Providing Mobile Phone - c Farmers' Exposure Visit d Natural Enemies Farm Reservior (NEFR) e Training Brochres/Pamphlel - f Facilitator Training 818,746 g Establishment of Kiosk I Resource Center - Training for HEIS/Studies 1,750.854 Grievances, RFP, EMP and GAP - total 4.,823.333 C3-Improved Agriculture Production Technology - Trainings Under this sub-component the project supports training of farmers to improve their crop and irrigation agronomy practices. Interventions will include: (a) establishing Farmer Field Schools with a focus on IPM (b) training of FFS facilitators (c) in- country exposure visits for farmers (d) demonstration of rearing beneficial insects on the farm and (e) training in crop production under High Efficiency Irrigation System (the drip system). D2-Training for HEISIStudies - Training Sub-Component D2 provides support for the Project Implementation Unit regarding trainings for HE ISIStudies, and Project district offices and field offices, and for carrying out strategic and feasibility studies for pilot activities. D3- Grievances, RFP, EMP and GAP - Training Sub-Component D3 provides support for the Project Implementation Unit regarding Grievances,RFP,EMP and GAP trainings. There is no payment has been made duing FY 2015-16 and FY 2016-17 under this Sub components. 11 Incremental Operating Cost Sub-Component D4 will provide support for the Project Implementation Unit and Project district offices and field offices, and for carrying out project activities. The cost at line items represents the actual expenditure Incurred against Recurring and Non Recurring cost(s) for the FY 2015-16. V1R FY 2 017-18 FY 2016-17 Receiptsl Receipts/ (Payments) Payments by (Payments) Payments by Controlled by Third Parties Controlled by Third Parties Project ProJect Incremental staff cost- Salaries 2,525,454 1.929,594 Incremental Operating Costs - PIU 29,342,065 - 8,670,178 Incremental Operating Costs (Directorates. 236,071,743 201,147,530 Districts & Field) - - Incremental Operating Cost (Regular staff - 6,799,000 760,170,876 Salaries & Allowances through DAC) total 267,939,262 6,799,000 211,747302 760,170,876 12 Cash and Bank: As at 30th June As at 30th June 2018 2017 Cash in Hand Cash at Bank PIU - DA 1,370,750,429 1,037,324,426 Dir Upper - Sukker 69,479,457 181,404 Dir Lower - Hyd 63,198,637 5,303,833 Total Cash at Bank 1,503,428,523 1,042,809,663 13 Authorization for Issue : These financial statements have been authorized for issue by the Project Director PIU SIAPEP on June 30.2018 14 General : Figures have been rounded off to the nearest rupee. IAPEP Hyderabad