O Nexia STT Results-based Operation for Local Bridge Construction and Road Asset Management Component 2 - Local Bridge Construction Audited Financial Statements Under Financing Agreement No. 5810-VN between the International Development Association and the Government of the Socialist Republic of Vietnam Year ended 31 December 2018 Results-based Operation for Local Bridge Construction and Road Asset Management Component 2 - Local Bridge Construction Under Financ1ng Agreement No. 5810-VV between the Internatlional Development Association and the Government of the 5ociahlst RepublIc of Vietnam Contents STATEMENT OF THE COMPONENT MANAGEMENT BOARD 2 INDEPENDENT AUDITORS' REPORT............................................................................5 BA LA N C E SHEET ......................................... ........................... .. ........................... 11 CONSOLIDATED STATEMENT OF SOURCES AND USES OF FUNDS 12 STATEMENT OF DESIGNATED ACCOUNT................................... ...................-...... 13 SOE WITHDRAWAL SCHEDULE - ACCOUNT NO. 174297 14 NOTES TO THE FINANCIAL STATEMENTS .................................................................15 Results-based Operation for Local Bridge Construction and Road Asset Management Component 2 - Local Bridge Construction Under Financing Agreement No. 5810- VN between the International Development Association and the Government of the Socialist RepublIc of Vietnam STATEMENT OF THE COMPONENT MANAGEMENT BOARD Project Management Unit 3 was assigned by the Ministry of Transport as the Owner Representative for Component 2 - Local Bridge Construction of the Project "Results-based Operation for Local Bridge Construction and Road Asset Management" ("the Component 2") using the World Bank's credit and the counterpart funds from the Government of Vietnam. Project Management Unit 3 ("the Component Management Unit") is responsible for the Financial Statements of Component 2 - Local Bridge Construction of the Project "Results-based Operation for Local Bridge Construction and Road Asset Management" ("the Project") for the year ended 31 December 2018. The Project The Project "Results-based Operation for Local Bridge Construction and Road Asset Management" was implemented by the Ministry of Transport (MOT) - the Socialist Republic of Vietnam according to Decision No. 330/QD-TTg dated 2nd March 2016 signed by the Prime Minister of the Socialist Republic of Vietnam and Decision No. 622/QD-BGTVT dated 2nd March 2016 signed by the Minister of the MOT. The Project was granted by the World Bank's credit through International Development Association ("IDA") under Financing Agreement No. 5810-VN dated 4th July 2016, with the total amounts equivalent to 278,800,000 Special Drawing Rights ("SDR"), and the counterpart funds from the Government of the Socialist Republic of Vietnam for seven (7) years from 2016 to 2023. The overall objective of the Project is to assist the Government and the Ministry of Transport in the National Strategy on Rural Transport Development and a National Program for Local Bridge Construction to ensure traffic safety in Ethnic Minority Areas and to improve access in rural areas with low accessibility, especially for areas where poor ethnic minority communities are located as well as other vulnerable groups such as single women and children. The Project consists of: (i) A Program using the Results-Based Program (PforR) instrument ("the Program"), supported by a IDA credit of USD380.5 million; and (ii) Technica Assistance ("the Project") using the Investment Project Financing (IPF) instrument, supported by a IDA credit of USD4.5 million. The Project's objectives are achieved by implementing the following components: - Component 1: Improvement, rehabilitation of local roads (managed by Froject Management Unit 6) - Component 2: Local Bridge Construction (managed by Project Management 3); and - Technical Assistance Component (managed by Project Management 6). A Program using the PforR instrument to assist the Government's program, consisting of two (2) Components 1 and 2 of the Project. Component 1 - Improvement, rehabilitation of local roads has been managed by the Project Management Unit 6 and implemented in 14 provinces, including: Lao Cai, Ha Giang, Nam Dinh, Thanh Hoa, Nghe An, Ha Tinh, Quang Binh, Bac Kan, Quang Tri, Thua Thien Hue, Quang Nam, Lang Son, Cao Bang, and Binh Dinh. The Component's objective is to provide support to the National Strategy for Rural Transport Development, through: (a) strengthening its institutional capacity to plan, implement and improve maintenance activities of the local road network; and (b) the improvement, rehabilitation, periodic and rountine maintenance of local roads based upon rolling Medium Term Expenditure Plans. 2 Results-based Operation for Local Bridge Construction and Road Asset Management Component 2 - Local Bridge Construction Under Financing Agreement No. 5810-VN between the International Development Association and the Government of the Sociahlst Repub/c of Vietnam STATEMENT OF THE COMPONENT MANAGEMENT BOARD (CONTINUED) Component 2 - Local Bridge Construction has been managed by the Project Management Units 3, 4, 6, and 8 and implemented in 50 provinces, including: Ha Giang, Cao Bang, Lai Chau, Dien Bien, Son La, Lao Cai, Yen Bai, Lang Son, Bac Kan, Tuyen Quang, Thai Nguyen, Phu Tho, Hoa Binh, Quang Ninh, Thanh Hoa, Nghe An, Ha Tinh, Quang Binh, Quang Tri, Thua Thien Hie, Quang Nam, Quang Ngai, Binh Dinh, Gia Lai, Kon Turn, Dak Lak, Dak Nong, Lam Dong, Bac Giang, Vinh Phuc, Ninh Binh, Hai Duong, Phu Yen, Ninh Thuan, Khanh Hoa, Binh Thuan, Binh Phuoc, Tra Vinh, Dong Nai, Vinh Long, Hau Giang, Kien Giang, An Giang, Soc Trang, Bac Lieu, Ca Mau, Tay Ninh, Can Tho, Dong Thap, and Ben Tre. The Component's objective is to provide support to the National Strategy for Rural Transport Development, through: (a) the construction of small bridges in poor and ethnic minority communities and villages with missing or unsafe links in order to facilitate access to social services, schools, and clinics within the local road network; and (b) strengthening of local communities' capacity to carry out bridge maintenance activities. The Technical Assistance Component is implemented by Project Managmen- Unit 6, consisting of activities that are necessary to complete the PforR, namely activities relatec to: (a) auditing the Program; (b) improving the capacity of implementing agencies in environmental and social management; and (c) the Local Road Asset Management Systems support, climate resilience in the road network, and community and women based road maintenance. Component Management Board The members of the Component Management Board are responsible for the management of the Component 2 - Local Bridge Construction of the Project during the year anc at the date of this report are as follows: Mr. Nguyen Xuan Truong Director Mr. Le Duc Loc Deputy Director Mr. Nguyen Tien Dat Chief Accountant Mr. Do Van Dang Head of Project Implementation Department 2 Auditors The accompanying Financial Statements for the year ended 31 December 2018 have been audited by NEXIA STT Co., Ltd. Responsibility of the Component Management Board in respect of the Financial Statements The Component Management Board is responsible for the Financial Statements which give a true and fair view of the financial position and designated account balance of the Component 2 - Local Bridge Construction as at 31 December 2018 and of its funds and expenditures, operations of designated account and total funds withdrawn for the year ended 31 December 2018. In preparing the Financial Statements, the Component Management Board is required to select suitable accounting policies and then apply them consistently. The Component Management Board is responsible for ensuring that proper accounting records are kept which enable the Financial Statements to be prepared in compliance w th the accounting policies set out in Note 2 to the Financial Statements. The Component Management Board is also responsible for safeguarding the assets of the Component 2 and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. 3 Results-based Operation for Local Bridge Construction and Road Asset Management Component 2 - Local Bridge Construction Under Financing Agreement No. 5810- VN between the International Develcoment Association and the Government of the Socialist Republic of Vietnam STATEMENT OF THE COMPONENT MANAGEMENT BOARD (CONTINUED) The Component Management Board assumes the responsibility to provide, and has provided, the auditors with all accounting records, supporting and other documents, minLtes, any pertinent information and explanations, either orally or by written confirmation, necessary for the audit. Approval of the Financial Statements We hereby approve the accompanying Financial Statements of the Project "Results-based Operation for Local Bridge Construction and Road Asset Management" - Component 2 - Local Bridge Construction on pages 11 to 23 which give a true and fair view of the financial position and designated account balance as at 31 December 2018 and its funds and expenditures, operations of designated account and total funds withdrawn for the year ended 31 December 2018 in accordance with the accounting policies as described in Note 2 to the Financial Statements and grant withdrawals have been adequately reconciled to the statements of expenditures prepared by the Component during the year, and such statements of expenditures were adequately supported. The Financial Statements were prepared in compliance with the Applicable Provisions of the Agreement and other Guidance from the World Bank. On behalf of the Component Management Board Mr. Nguyen Xuan Truong Diector Hanoi, 30 July 2019 4 Ha Office Nexia F an. er,C STT P, --'-fc HocinmbC ,'Office F11 INDEPENDENT AUDITORS' REPORT On Component Financial Statements To: The Management Board of the Project "Results-based Operation for Local Bridge Construction and Road Asset Management" Component 2 - Local Bridge Construction Audit opinion We have audited the accompanying Balance Sheet as at 31 December 2018, the Consolidated Statement of Funds and Expenditures, the Statement of Designated Account and the SOE Withdrawal Schedule for the year ended 31 December 2018 (collectively referred to as the "Financial Statements") of the Project "Results-based Operation for Local Bridge Construction and Road Asset Management" - Component 2 - Local Bridge Construction ("the Component 2") implemented by World Bank's credit through International Development Association ("IDA") and counterpart funds, and summary of significant accounting policies and other explanatory information. In our opinion, in all material respects: a) the Balance Sheet and the Consolidated Statement of Funds and Expenditures give a true and fair view of the financial position of the Component 2 as at 31 December 2018 and of its funds and expenditures for the year ended 31 December 2018 in conformity with the accounting policies described in Note 2; b) the Statement of Designated Account and the SOE Withdrawal Schedule give a true and fair view of the designated account balance as at 31 December 2018 and of operations of the designated account, and of the funds withdrawn for the year ended 31 December 2018, in conformity with the accounting policies described in Note 2; and c) the Statements of Expenditures and Summary Sheets are fully prepared and maintained with adequate supporting documents to support for the replenishment requests submitted to the World Bank. Funds disbursed through the statements of expenditures and summary sheets are utilized for purposes defined in Financing Agreement No. 5810-VN. Basis for opinion We conducted our audit in accordance with International Standards on Audit:ng ("ISAs"). Our responsibilities under those standards are further described in the Auditors Pesponsibilities for the Audit of the Financal Statements section of our report. We are independent of the Component 2 in accordance with the ethical requirements that are relevant to our audit of the Financial Statements in accordance with ISAs, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. iii5 Nexia STT Responsibilities of Component Management for the Financial Statements Component Management is responsible for the preparation and fair presentarion of the Financial Statements in accordance with Note 2 and for such internal control as management determines is necessary to enable the preparation of Financial Statements that are free from material misstatement, whether due to fraud or error. Auditors' Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the Financial Statements of the Component 2 as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' 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 ISAs 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 the Financial Statements. A further description of the auditors' responsibilities for the audit of the Finarcial Statements are included in Appendix I of this auditors' report. This description, which is represented at page 24, forms part of our auditors' report. NEX JSTT Nguyen Trung General Director Audit Practicing Registration Certificate No. 0518-2018-225-1 Audit report No.: 2019/HN-AU/WB-LRAMP Hanoi, 30 July 2019 6 Nexia a ar Ofio! STT -P Hoch mmnhC / Office H ~c ...... 0-c INDEPENDENT AUDITORS' REPORT On Compliance with the Applicable Laws, Regulations, Procurement Procedures and Other Provisions of the Financing Agreement To: The Management Board of the Project "Results-based Operation for Local Bridge Construction and Road Asset Management" Component 2 - Local Bridge Construction Audit opinion We have audited the Compliance with the Applicable Laws, Regulations, Procurement Procedures and Other Provisions of Financing Agreement No. 5810-VN of the Project "Results-based Operation for Local Bridge Construction and Road Asset Management" - Component 2 -- Local Bridge Construction ("the Component 2") implemented by World Bank's credit through International Development Association ("IDA") and counterpart funds for the year ended 31 December 2018. In our opinion, the Component 2 was, in all material respects, in compliance with the applicable laws, regulations, the procurement procedures and other provisions of Financing Agreement No. 5810-VN that could have a direct and material effect on the Component 2's Financial Statements for the year ended 31 December 2018. Basis for Opinion We conducted our engagement in accordance with International Standards on Assurance Engagements 3000, "Assurance Engagements other than Audits or Reviews of Historical Financial Information", issued by the International Auditing and Assurance Standards Board. Our responsibility is to express an opinion on the Component 2's compliance with the requirements, based on our procedures. We are independent of the Component 2 in accordance with the ethical requirements that are relevant to our audit of the financial statements in accordance with ISAs, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of Component Management The Component Management Board is responsible for compliance with the Applicable Laws, Regulations, Procurement Procedures and Other Provisions of Financing Agreement No. 5810-VN that could have a direct and material effect on the Financial Statements for tie year ended 31 December 2018. 7 Nexia STT Auditors' Responsibilities Our responsibility is to express an opinion on the Component 2's compliance with the requirements, based on our procedures. We conducted our engagement in accordance wit[ International Standards on Assurance Engagements 3000, "Assurance Engagements other than Audits or Reviews of Historical Financial Information", issued by the International Auditing and Assurance Standards Board. That standard requires that we comply with ethical requirements, plan and perform our procedures to obtain reasonable assurance about whether, in all material respects, the Component 2 has complied with the requirements. An assurance engagement to report on the compliance with regulatory and contractual requirements at a Component 2 involves performing procedures to obtain evidence about whether the Component 2's activities are free of material noncompliance with the requirements. The procedures selected depend on the auditor's judgment, including the assessment of risks that the Component 2 does not comply with the requirements and whether such noncompliance could have a direct and material effect on the Component 2's Financial Statements. Our procedures included testing the compliance with the requirements that we consider necessary to provide reasonable assurance that the requirements are complied by the Component 2. NEXIAIITT b& . Nguyen ung General Director Audit Practicing Registration Certificate No. 0518-2018-225-1 Audit report No.: 2019/HN-AU/WB-LRAMP Hanoi, 30 July 2019 8 Ha Office 4STT ,inh C Office 9 F, Es'arSidg 14 - P 8428 3 30 488 - F 28 II 004 E.nedastK lnea An ww eiav INDEPENDENT AUDITORS' REPORT On the effectiveness of internal control over compliance with requirements that could have a direct and material financial effect on the Financial Statements as well as of internal control over financial reporting To: The Management Board of the Project "Results-based Operation for Local Bridge Construction and Road Asset Management" Component 2 - Local Bridge Construction Audit opinion We have audited, in accordance with International Standards on Auditing, the Financial Statements of the Project "Results-based Operation for Local Bridge Construction and Road Asset Management" - Component 2 - Local Bridge Construction ("the Component 2") implemented by World Bank's credit through International Development Association ("IDA") and counterpart funcs for the year ended 31 December 2018 and issued the auditors' report thereon expressing an unqualified opinion on those Financial Statements. In connection with our audit of the Financial Statements, we also examined the effectiveness of internal control over compliance with requirements that could have a direct and material financial effect on the Financial Statements as well as of internal control over financia reporting. In our opinion, the Component 2 has maintained, in all material respects, effective internal control over compliance with requirements that could have a direct and material financial effect on the Financial Statements as well as of internal control over financial reporting for the year ended 31 December 2018. Basis for Opinion We conducted our engagement in accordance with International Standards on Assurance Engagements 3000. Our responsibility is to express an opinion on the effectiveness of internal control over compliance with requirements that could have a direct and material effect on the Financial Statements as well as internal control over financial reporting based on our examination. We are independent of the Component 2 in accordance with the ethical requirements that are relevant audit evaluates the effectiveness of internal controls on the compliance of the requirements that may directly and materially affect the financial statements as well as internal control purposes in preparation of financial statements in accordance with ISAs, and we have fulfilled our other ethica responsibilities in accordance with these requirements. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. =9 r Nexia STT Responsibilities of Component Management The Component management is responsible for designing and maintaining effective internal control over compliance with requirements that could have a direct and material effect on the Financial Statements as well as over financial reporting for the purpose of properly preparing and presenting the financial statements so as to minimize errors and frauds; and take responsibility for its assertions as to the effectiveness of such internal control. Auditors' Responsibilities Our responsibility is to express an opinion on the effectiveness of internal control over compliance with requirements that could have a direct and material effect on the Financial Statements as well as internal control over financial reporting based on our examination. Our examination was conducted in accordance with International Standard on Assurance Engagement 3000, accordingly, included obtaining an understanding of internal control over compliance with requirements that could have a direct and material effect on the Financial Statements as well as of internal control over financial reporting, testing, and evaluating the design and operating effectiveness of the internal control, and performing such other procedures as we considered necessary in the circumstances to obtain sufficient appropriate evidence on which to base our opinion. Because of inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not to be prevented or detected on a regular basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. NEXIA Sk Co, Nguyen Tha rung General Director Audit Practicing Registration Certificate No. 0518-2018-225-1 Audit report No.: 2019/HN-AU/WB-LRAMP Hanoi, 30 July 2019 10 Results-based Operation for Local Bridge Construction and Road Asset Management Component 2 - Local Bridge Construction Under Financing Agreement No. 5810- Vv between the International Develcpment Assoclation and the Government of the Sociallst Republic of Vietnam BALANCE SHEET As at 31 December 2018 As at As at Note 31/12/2018 31/12/2017 VND VND ASSETS Current assets 1,107,682,131,794 314,195,606,248 Cash on hand 3 134,067,300 526,440,30C Cash at bank - Designated Account 4 - . Cash at bank - State Treasury 5 2,948,484,821 72,857,125 Cash at bank - Commercial Bank Account 6 29,612,776,239 1,039,569,65C Internal receivables 7 493,187,374 Advances to contractors/suppliers 8 1,067,779,516,909 308,699,574,173 Other advances 9 6,714,099,151 3,857,165,000 TOTAL ASSETS 1,107,682,131,794 314,195,606,248 RESOURCES Current liabilities 129,982,116,535 24,507,400,420 Payables to contractors 10 129,040,382,135 23,980,960,120 Other payables 11 941,734,400 526,440,300 Fund balance 977,700,015,259 289,688,205,828 Fund balance, end of the year/period 18 977,700,015,259 289,688,205,828 TOTAL RESOURCES 1,107,682,131,794 314,195,606,248 Prepared by: Approved y: Nguyen Tien Dat Nguyen Xuan Truong Chief Accountant Director Hanoi, 30 July 2019 The accompanying notes form an integral part of the Financial Statements 11 Results-based Operation for Local Bridge Construction and Road Asset Management Component 2 - Local Bridge Construction Under Financing Agreement No. 5810-VN between the International Development Association and the Government of the Socialist Republic of Vietnam CONSOLIDATED STATEMENT OF FUNDS AND EXPENDITURES Year ended 31 December 2018 Period Accumulated Note Year ended from 4/10/2016 from 4/10/2016 31/12/2018 to 31/12/2017 to 31/12/2018 VND VND VND Funds Funds received from the 12 1,743,088,726,218 541,577,109,570 2,284,665,835 788 World Bank Counterpart funds 13 15,357,775,708 12,159,700,000 27,517,475,708 Other funds 14 452,375,000 - 452,375 000 1,758,898,876,926 553,736,809,570 2,312,635,686,496 Expenditures 1. Civil works 15 904,308,890,479 178,530,546,150 1,082,839,436 629 2. Consultants on construction cnestmt,ot 16 154,481,032,732 77,215,522,592 231,696,555 324 investment, other expenses 3. Project management 17 12,097,144,284 8,302,535,000 20,399,679 284 expenses 1,070,887,067,495 264,048,603,742 1,334,935,671,237 Surplus of funds and 688,011,809,431 289,688,205,828 977,700,015,259 expenditures Fund balance, beginning of the year/period 289,688,205,828 - Fund balance, end of the 18 977,700,015,259 289,688,205,828 977,700,015,259 year/period______________________ _____ Prepared by: Approved by; Nguyen Tien Dat Nguyen Xu)n Truong Chief Accountant Director Hanoi, 30 July 2019 The accompanying notes form an integral part of the Financlal Statements :2 Results-based Operation for Local Bridge Construction and Road Asset Management Component 2 - Local Bridge Construction Under Financing Agreement No. 5810-VN between the International Development Assoclation and the Government of the Socialist Repub/ic of Vietnam STATEMENT OF DESIGNATED ACCOUNT Year ended 31 December 2018 Account No.: 174297 Account holder: Local Bridge Construction and Road Asset Management (WB) Bank: Transaction Head Office - State Bank of Vietnam Address: No. 49 Ly Thai To, Hoan Kiem district, Hanoi Financing Agreement No.: 5810- VN Part A - Account activities Note USD Balance as at 31 January 2018 Add: Total amount advanced to the Designated Account 12 77,093,639.7-, Deduct: Total amount withdrawn (77,093,639.71) Balance as at 31 January 2019 4 Part B - Account reconciliation Amount advanced from the World Bank 24,129,745.01 Add: Amount advanced by the World Bank 77,093,639.7( Deduct: Amount recovered by the World Bank according to DLIs results (54,768,438.0C) Outstanding amount advanced to the Designated Account as at 31 46,454,946.71, December 2018 Balance of Designated Account as at 31 January 2019 4 Add: Amount withdrawn and not yet claimed 19 46,454,946.7( Total advances to Designated Account as at 31 December 2018 46,454,946.7 Prepared by: Approved by- Nguyen Tien Dat Nguyen XLan Truong Chief Accountant Director Hanoi, 30 July 2019 The accompanying notes form an integral part of the Financial Statements 13 Results-based Operation for Local Bridge Construction and Road Asset Management Component 2 - Local Bridge Construction L/nder FinancIng Agreement No. 5810- VN between the International Deve/opment Association and the Government of the Sociahst Republic of Vietnam SOE WITHDRAWAL SCHEDULE - ACCOUNT NO. 174297 Year ended 31 December 2018 Unit: USD Withdrawal applications CatgOres No, Date Advances 04-PMU3-HPC 6/2/2018 38,310,000.00 05-PMU3-HPC 28/11/2018 38,783,639.79 Total advanced amount 77,093,639.79 Prepared by: Approved by: Nguyen Tien Dat Nguyen Xuan Truong ChiefAccountant Director Hanoi, 30 July 2019 The accompanying notes form an integral part of the Financal Statements 14 Results-based Operation for Local Bridge Construction and Road Asset Management Component 2 - Local Bridge Construction Under Financing Agreement No. 5810- VN between the International Development Association and the Government of the Soci/st Republec of Vietnam NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2018 1. Project background The Project "Results-based Operation for Local Bridge Construction and Road Asset Management" was implemented by the Ministry of Transport (MOT) - the Socialist Republic of Vietnam according to Decision No. 330/QD-TTg dated 2nd March 2016 signed by the Prime Minister of the Socialist Republic of Vietnam and Decision No. 622/QD-BGTVT dated 2nd March 2016 signed by the Minister of the MOT. The Project was granted by the World Bank's credit through International Development Association ("IDA") under Financing Agreement No. 5810-VN dated 4th July 2016, with the total amounts equivalent to 278,800,000 Special Drawing Rights ("SDR"), and the counterpart funds from the Government of the Socialist Republic of Vietnam for seven (7) years from 2016 to 2023. The overall objective of the Project is to assist the Government and the Ministry of Transport in the National Strategy on Rural Transport Development and a National Program for Local Bridge Construction to ensure traffic safety in Ethnic Minority Areas and to improve access in rural areas with low accessibility, especially for areas where poor ethnic minority communities are located as well as other vulnerable groups such as single women and children. The Project consists of: (i) A Program using the Results-Based Program (PforR) instrument ("the Program"), supported by a IDA credit of USD380.5 million; and (ii) Technica Assistance ("the Project") using the Investment Project Financing (IPF) instrument, supported by a IDA credit of USD4.5 million. The Project's objectives are achieved by implementing the following components: - Component 1: Improvement, rehabilitation of local roads (managed by Froject Management Unit 6) - Component 2: Local Bridge Construction (managed by Project Management 3); and - Technical Assistance Component (managed by Project Management 6). A Program using the PforR instrument to assist the Government's program, consisting of two (2) Components 1 and 2 of the Project. Component 1 - Improvement, rehabilitation of local roads has been managed by the Project Management Unit 6 and implemented in 14 provinces, including: Lao Cai, Ha Giang, Nam Dinh, Thanh Hoa, Nghe An, Ha Tinh, Quang Binh, Bac Kan, Quang Tri, Thua Thien Hue, Quang Nam, Lang Son, Cao Bang, and Binh Dinh. The Component's objective is to provide support to the National Strategy for Rural Transport Development, through: (a) strengthening its institutional capacity to plan, implement and improve maintenance activities of the local road network; and (b) the improvement, rehabilitation, periodic and rountine maintenance of local roads based upon rolling Medium Term Expenditure Plans. 15 Results-based Operation for Local Bridge Construction and Road Asset Management Component 2 - Local Bridge Construction Under Fi_ancing Agreement No. 5810- VN between the International Development Association and the Government of the 5ocialist Republic of Vietnam Component 2 - Local Bridge Construction has been managed by the Project Management Units 3, 4, 6, and 8 and implemented in 50 provinces, including: Ha Giang, Cao Bang, Lai Chau, Dien Bien, Son La, Lao Cai, Yen Bai, Lang Son, Bac Kan, Tuyen Quang, Thai Nguyen, Phu Tho, Hoa Binh, Quang Ninh, Thanh Hoa, Nghe An, Ha Tinh, Quang Binh, Quang Tri, Thua Thien Hie, Quang Nam, Quang Ngai, Binh Dinh, Gia Lai, Kon Tum, Dak Lak, Dak Nong, Lam Dong, Bac Giang, Vinh Phuc, Ninh Binh, Hai Duong, Phu Yen, Ninh Thuan, Khanh Hoa, Binh Thuan, Binh Phuoc, Tra Vinh, Dong Nai, Vinh Long, Hau Giang, Kien Giang, An Giang, Soc Trang, Bac Lieu, Ca Mau, Tay Ninh, Can Tho, Dong Thap, and Ben Tre. The Component's objective is to provide support to the National Strategy for Rural Transport Development, through: (a) the construction of small bridges in poor and ethnic minority communities and villages with missing or unsafe links in order to facilitate access to social services, schools, and clinics within the local road network; and (b) strengt[ening of local communities' capacity to carry out bridge maintenance activities. The Technical Assistance Component is implemented by Project Managment Unit 6, consisting of activities that are necessary to complete the PforR, namely activities related to: (a) auditing the Program; (b) improving the capacity of implementing agencies in environmental and social management; and (c) the Local Road Asset Management Systems support, :limate resilience in the road network, and community and women based road maintenance. 2. Summary of significant accounting policies The significant accounting policies, which have been adopted by the Component Management Board in the preparation of the Financial Statements, are as follows: Reporting currency The Financial Statements, including the Balance Sheet and the Consolidated Statement of Funds and Expenditures are expressed in Vietnam Dong ("VND"), except for the Statement of Designated Account and SOE Withdrawal Schedule which are expressed in United States Dollar ("USD"), are prepared considering the requirements of the World Bank. Basis of preparation of the Financial Statements The Financial Statements are prepared and presented by the Component in accordance with requirements of the World Bank (WB), complied with Circular No. 195/2012/TT-BTC dated 15th November 2012 issued by the Ministry of Finance guiding the accounting recime applicable to investors. The financial statements are prepared on modified cash basis under the financial year regulated by the Vietnamese Government, including payments in January of the following year for expenditures incurred before 31 December of the prior year. This basis of accounting is considered appropriate to the operation of Component by the management. Funds IDA funds are recorded when credited to the Designated Account of the Component. The counterpart funds of the Vietnamese Government are recorded when payments are made directly from the Vietnamese Government to contractors/suppliers of the Component or when received. The funds are recorded under the budget year, including payments from IDA funds and counterpart funds in January of the following year for expenditures incurred before 31 December of the prior year. 16 Results-based Operation for Local Bridge Construction and Road Asset Management Component 2 - Local Bridge Construction Under Fiancing Agreement No. 5810-VN between the International Development Assocation and the Government of the Socialist Republic of Vietnam Expenditures Expenditures financed by IDA are recorded when the obligation to pay them arises rather than when actually paid. Expenditures financed by the counterpart funds are recorded when they are approved by the State Treasury except for expenditures for contractors/suppliers on completion of works or completion of contracts, and advances to staffs, advances to contractors/suppliers. Overall management expenses are recognized and monitored by functional Project Management Units for all projects managed by functional Project Management Units, then allocated to individual projects in accordance with their corresponding annual budget, ensuring that accumulated management expenses of each Project do not exceed its overall approved budget. Fiscal year Fiscal years will be from 1 January to 31 December for completion volume cf works/contracts and to 31 January of the following year for disbursements volume. Foreign exchange differences IDA funds received in United States Dollar ("USD") are converted into Vietnam Dong ("VND") under the exchange rate announced by the Transaction Head Office - State Bank of Vietnam at the date of receipt. Transactions incurred in the year via the Designated Account are converted into VND using exchange rates ruled by the Project bank at transaction dates for expenditures denominated in VND and using exchange rates announced by Transaction Head Office - State Bank of Vietnam at the month of transaction for expenditures denominated in USD. Foreign exchange differences are taken up in the Consolidated Statement of Funds and Expenditures. Designated Account Designated Account is a deposit account in USD opened at the Transation Head Office - State Bank of Vietnam, which was held by the Ministry of Finance for settlements of the Component 2's activities. Payments made via the Designated Account are for eligible expenditures of the Component in accordance with provisions of Financing Agreement No. 5810-VN dated 4h July 2016. 3. Cash on hand This represented net cash income from selling bidding documents of the Project Management Unit 6 as at 31 January 2019. Such amounts are to cover bidding related expenses in the next years or be refunded to the State Budget. 17 Results-based Operation for Local Bridge Construction and Road Asset Management Component 2 - Local Bridge Construction Under Financing Agreement No. 5810- VN between the International Develcpment Assocation and the Government of the Socialist Repubt of Vietnam 4. Cash at bank - Designated Account This represented the designated account balance of the Component 2 - Local Bridge Construction at Transaction Head Office - State Bank of Vietnam, which was converted into Vietnam Dong ("VND") as at 31 January 2019 because payments from IDA funds were recorded under the budget year (year ended 31 January 2019). Balance of this account as at 31 January 2019 was nil (31/1/2018: nil). 5. Cast at bank - State Treasury As at As at Unit 31/1/2019 31/1/2018 VND VND Project Management Unit 3 (*) 1,307,571,576 Project Management Unit 4 882,450,860 - Project Management Unit 6 - Bridge Component (**) 571,875,000 72,857,125 Project Management Unit 8 186,587,3_85 2,948,484,821 72,857,125 These represented bank balances at State Treasury Accounts of functional Project Management Units as at 31 January 2019 because payments from IDA funds were recorded under the budget year (year ended 31 January 2019). These accounts were opened to receive funds from the World Bank for settlements of the Component 2's activities. (*) Included in the balance at the State Treasury account of the Project Management Board 3 was an advance settlement of VND630,711,000 made by Hoang Long Tuyen Quang Co., Ltd. because the Company stopped the construction half-way through, breaking Contract No. 05/2016/HDXL-LRAMP- TQ01 dated 20th September 2017 between PMU 3 and the Joint Venture of Hoang Long Tuyen Quang Co., Ltd. and 27-7 Company Limited for the bidding package TQ:1-XD:1- Bridge Construction, Component 1, Tuyen Quang province. Such amount was recovered by the State Treasury by deducting from the State Account of the PMU 3 in 2018 and cashed back to the PMU 3 in June 2019 for settlements of its eligible expenditures. (**) Balance at State Treasury Account of Project Management 6 represented amounts from counterpart funds budgeted for 2018 management expenses that have not been utilized and being kept in their same State Treasury account opened for management expenditires. 18 Results-based Operation for Local Bridge Construction and Road Asset Management Component 2 - Local Bridge Construction Under Fiancing Agreement No. 5810-VN between the International Development Assoclation and the Government of the So; cia&t Republic of Vietnam 6. Cash at bank - Commercial Bank Account As at As at Unit 31/1/2019 31/1/2018 VND VND Project Management Unit 4 (i) 22,211,629,000 Project Management Unit 6 - Bridge Component (ii) 807,667,100 Project Management Unit 8 (iii) 6,593,480,139 1,039,569,650 29,612,776,239 1,039,569,650 (i) This represented the bank balance at a general bank account for temporary retention from construction and consultant contracts under the Component 2 by the Project Management Unit 4. (ii) This represented the bank balance at Sai Gon Joint Stock Commercial Eank - Western Hanoi Branch for net cash income from selling bidding documents of bidding packages under the Component 2 by the Project Management Unit 6. (iii) This represented the bank balance at Maritime Bank for temporary retention from construction and consultant contracts under the Component 2 by the Project Management Unit 8. 7. Internal receivables This represented receivables from the Project Management Unit 8 relating tc the counterpart funds budgeted for 2018 management expenses that have not been utilized and being kept in their same State Treasury account opened for management expenditures. 8. Advances to contractors/suppliers As at As at Unit 31/12/2018 31/12/2017 VND VND Project Management Unit 3 395,723,396,436 129,659,949,337 Project Management Unit 4 343,691,991,330 77,676,743,500 Project Management Unit 6 - Bridge Component 170,009,952,633 56,810,683,724 Project Management Unit 8 158,354,176,410 44,552,197,612 1,067,779,516,909 308,699,574,173 These represented advances to contractors to implement consulting service and civil works contracts from the World Bank's funds as at 31 December 2018. 19 Results-based Operation for Local Bridge Construction and Road Asset Management Component 2 - Local Bridge Construction Under Financing Agreement No. 5810- VN between the International Development Association and the Government of the Socialist Republic of Vietnam 9. Other advances As at As at Unit 31/12/2018 31/12/2017 VND VND Project Management Unit 3 606,929,019 Project Management Unit 4 3,341,159,000 1,673,465,000 Project Management Unit 6 - Bridge Component 1,697,300,000 2,183,700,000 Project Management Unit 8 1,068,711,132 6,714,099,151 3,857,165,000 These represented advances to Provincial Project Management Units from counterpart funds to implement entrusted management contracts of the Component 2 - Local Bridge Construction of the Project as at 31 December 2018. 10. Payables to contractors As at As at Unit 31/1/2019 31/1/2018 VND VND Project Management Unit 3 29,135,951,419 8,360,969,037 Project Management Unit 4 48,425,334,428 9,159,950,286 Project Management Unit 6 - Bridge Component 15,746,288,585 2,693,536,255 Project Management Unit 8 35,732,807,7)3 3,766,504,542 IDA funds 35,523,817,692 3,766,504,542 Counterpart funds (*) 20,990,191 129,040,382,135 23,980,960,120 Payables to contractors included the volume of completed works to be paid to contractors and temporary retentions for warranties of completed construction and consultant contracts which would be paid to contractors at the end of warranty period from the World Bank's funds as at 31 January 2019 because payments from the World Bank's funds were recordec under the budget year (year ended 31 January 2019). (*) This represented management expenditures payable to Binh Phuoc Project management Unit as at 31 December 2018. Such expenditures will be paid from counterpart fuids in 2019. 11. Other payables This represented surplus of income over expenses from selling bidding documents by the Project Management Unit 6 under the Component 2 of the Project. Such amounts were recorded as other payables under Circular No. 195/2012/TT-BTC dated 15th November 2012 issued by the Ministry of Finance - Accounting guidance applied to Investors; and will be disbursed for bidding related expenses in the next years or refunded to the State Budget. 20 Results-based Operation for Local Bridge Construction and Road Asset Management Component 2 - Local Bridge Construction Under FinancIng Agreement No. 5810-VN between the International Deve/oment Association and the Government of the Sociali5t Republic of Vietnam 12. Funds received from the World Bank Ministry of Finance - Component 2 - Local Bridge Construction (funds received to Account 174297) Year ended 31/12/2018 Receipts under withdrawal applications Original amount Equivalent to No. Date USD VND 04-PMU3-HPC 13/2/2018 38,310,000.OC 859,791,330,000 05-PMU3-HPC 6/12/2018 38,783,639.79 883,297,396,218 Total funds replenished to Designated Account 77,093,639.7S 1,743,088,726,218 Details of Funds received from the World Bank by the functional PMU were as follows: Unit Year ended 31/12/2018 Accumulated to 31/12/ 2018 Equivalent to Equivalent to USD VND USD VND Project Management Unit 3 23,836,702.55 539,072,860,576 31,948,781.55 721,148,9(5,284 Project Management Unit 4 28,722,970.40 649,982,450,860 36,749,542.40 830,133,6: 6,404 Project Management Unit 6 14,024,909.26 317,046,828,397 18,865,704.26 425,688,2/2,567 - Bridge Component Project Management Unit 8 10,509,057.58 236,986,586,385 13,659,356.58 307,695,011,533 77,093,639.79 1,743,088,726,218 101,223,384.79 2,284,665,8- 5,788 13. Counterpart funds Year ended Accumulated to Unit 31/12/2018 31/12/2018 VND VND Project Management Unit 3 4,440,000,000 8,120,000,000 Project Management Unit 4 3,256,000,000 6,896,000,000 Project Management Unit 6 - Bridge Component 3,729,000,000 7,138,700,000 Project Management Unit 8 3,932,775,708 5,362,775,708 15,357,775,708 27,517,475,708 14. Other funds These represented amounts of Bonus and Welfare Fund and Career development fund which were allocated to the Component 2 of the Project by the Project Management Unit 6 based on its financial results during the year as regulated in Circular No. 72/2017/TT-BTC of the Ministry of Finance dated 17" July 2017 on the management and use of receipts from project management activities by investors and management units of projects funded from the State Budget. 21 Results-based Operation for Local Bridge Construction and Road Asset Management Component 2 - Local Bridge Construction Under Financing Agreement No. 5810-VN between the International Development Association and the Government of the Socialst Republic of Vietnam 15. Civil works Year ended Accumulated to Unit 31/12/2018 31/12/2018 VND VND Project Management Unit 3 242,283,710,740 280,149,411,495 Project Management Unit 4 360,011,757,129 454,064,493,102 Project Management Unit 6 - Bridge Component 172,023,476,894 197,844,212,316 Project Management Unit 8 129,989,945,716 150,781,319,716 904,308,890,479 1,082,839,436,629 These represented expenditures for civil works activities incurred at functioral PMUs, which were disbursed from the World Bank's funds. 16. Consultants on construction investment, other expenses Year ended Accumulated to Unit 31/12/2018 31/12/2018 VND VND Project Management Unit 3 50,193,113,543 73,104,477,196 Project Management Unit 4 40,126,750,133 57,708,446,490 Project Management Unit 6 - Bridge Component 44,949,691,999 73,580,366,153 Project Management Unit 8 19,211,477,05- 27,303,265,485 154,481,032,732 231,696,555,324 These represented expenditures for consultancy services and other related expenses for construction activities incurred at functional PMUs, which were disbursed from the World Bank's funds. 17. Project management expenses Year ended Accumulated to Unit 31/12/2018 31/12/2018 VND VND Project Management Unit 3 3,833,070,981 7,513,070,981 Project Management Unit 4 1,588,306,000 3,554,841,000 Project Management Unit 6 - Bridge Component 4,095,900,000 5,321,900,000 Project Management Unit 8 2,579,867,303 4,009,867,303 12,097,144,284 20,399,679,284 These represented management expenditures, which were finalized during the year and disbursed from the counterpart funds. 22 Results-based Operation for Local Bridge Construction and Road Asset Management Component 2 - Local Bridge Construction Under Financlng Agreement No. 5810- VN between the International Development Association and the Government of the Socialist RepublIc of Vietnam 18. Fund balance, end of the year/period As at As at Unit 31/12/2018 31/12/2017 VND VND Project Management Unit 3 368,501,945,612 121,298,980,300 Project Management Unit 4 321,701,895,812 70,190,258,214 Project Management Unit 6 - Bridge Component 156,532,839,098 56,373,704,594 Project Management Unit 8 130,963,334,737 41,825,262,720 977,700,015,259 289,688,205,828 19. Amount withdrawn and not yet claimed These represented advances to Project Management Units 3, 4, 6, and 8 in 2018 to implement contracts under the Component 2 - Local Bridge Construction of the Project These expenses will be recovered after the results of DLIs indicators are accepted by the World Bank. Prepared by: Approvedby: Nguyen Tien Dat Nguyen Xuan Truorg Chief Accountant Director Hanoi, 30 July 2019 23 Results-based Operation for Local Bridge Construction and Road Asset Management Component 2 - Local Bridge Construction Under Financing Agreement No. 5810- VN between the International Develcoment Association and the Government of the Social]st Republic of Vietnam Appendix I - Auditors' Responsibilities for the Audit of the Financial Statements As part of an audit in accordance with ISAs, 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 i 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. * Evaluate the appropriateness of accounting policies used and related disclosures made by Componen management. * 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. We communicate with those charged with Component Management Unit 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 Component Management Unit with a statement that we have complied with relevant ethical requirements regarding independence, and tc communicate with them a relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with Component Management Unit, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. 24