0Ä Islamic Republic of Afghanistan Supreme Audit Office AUDIT REPORT FY 1397 (2018) P160606 D2070 & A6345 Strategic Grain Reserve (SGR) Islamic Republic of Afghanistan Supreme Audit Office Reference Number: ............ Date'f/ / Auditor General's Report To His Excellency, Minister of Finance, Government of Islamic Republic of Afghanistan. Report on the Audit of the Financial Statements Opinion We have audited the accompanying Statements of Cash Receipts and Payments (the "Financial Statements") of Strategic Grain Reserve (SGR) Project bearing World Bank Project ID Number P160606 financed underGrant Numbers TF-0A6345 & D2070 (hereinafter referred toas "Project") for the financial year ended 30 Qaws 1397 (21 December 2018), which comprise the summary of significant accounting policies and other explanatory notes forming part of the financial statements. In our opinion, the accompanying financial statements present fairly, in all material respects, the cash receipts and payments of the Project for the financial year ended on 30 Qaws 1397 (21 December 2018) in accordance with Cash Basis IPSAS (International Public Sector Accounting Standard) - "Financial Reporting under the Cash Basis of Accounting" and comply with the terms and conditions of Project's Grant/ or Financing Agreement. Basis for Opinion We conducted our audit in accordance with International Standards of Supreme Audit Institutions ("ISSAls"). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit ofthe Financial Statements section of our report. We are the Supreme Audit Institution (SAI) of Islamic Republic of Afghanistan and independently derive our legal mandate from the Supreme Audit Office Law and in accordance with the Code of Ethics implemented by the SAO based on the ISSAI 130- Code of Ethics together with the ethical requirements that are relevant to our audit of the financial statements in Afghanistan and applicable to SAO auditors including external experts for the audit, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics of SAO. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilitiet of Ministry of Finance for the Financial Statements Page 1 of 3 The Ministry of Finance (the Ministry) is responsible for the preparation and fair presentation of the project financial statements in accordance with International Public Sector Accounting Standards "Financial Reporting under the Cash Basis of Accounting" and for such internal control as the Ministry determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error and selecting and applying appropriate accounting policies. The Ministry is also responsible for ensuring that activities and financial transactions and information reflected in the Financial Statements are in compliance with the project's Grant/ or Financing Agreement. Those charged with governance of the Ministry are responsible for overseeing the project's financial reporting process. Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's 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 ISSAls 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 these financial statements. As part of an audit in accordance with ISSAls, 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 a 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, but not for the purpose of expressing an opinion on the effectiveness ofthe project's internal control. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. * Evaluatetheoverall presentation, structure and content of the financial statements, including the disclosures, and whether the finaicial statements represent the underlying transactions and events in a manner that achieves fair presentation. * Evaluate the financial transactions and information ref ected in the Financial Statements and whether they are in compliact with the terms and conditions of Project's Grant/ or Financing Agreements. Page 2 of 3 We cornmunicate with those charged with governance of the Ministry 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 governance of the Ministry with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. Report on Other Requirements Management Letter highlighting the areas of improvement in financial management including the compliance with covenants of the Grant/ Financing Agrccments and resu ts of its operations for the financial year ended on 30 Qaws 1397 (21 December 2018) has been attached to this report. These observations and recommendation have been comimunicated to and discussed with project management and intended to improve internal control and results in other operating efficiencies of the Project. Mo rnmad Naie Haqmal Audit Gei Supreme Audit Office Page 3 of 3 Islamic Republic of Afghanistan Afghanistan Strategic Grain Reserve Project World Bank Reference: Project ID P160606; Grant ID D2070 & A6345 Financial Statements for the year ended 30th Qaws 1397 (21t December, 2018) Afghanistan Strategic Grain Reserve Project World Bank Reference: Project ID P160606; Grant ID D2070 & A6345 STATEMENT OF CASH RECEIPTS AND PAYMENTS FOR THE YEAR ENDED 30 QAWS 1397 (21 DECEMBER 2018) 1397 Cumulative Receiptsi To Date Payments Controlled by entity USD USD RECEIPTS Initial Advance 572,481 572,481 Replenishment 193,437 193,437 Reimbursement 154,310 154,310 TOTAL RECEIPTS 920,228 920,228 PAYMENTS Disbursement Category: Goods, Works, Non-Consulting Services, Consultants Services, Training and Incremental Operating Costs 690,815 690,815 Bank Charges 50 50 TOTAL PAYMENTS 690,865 690,865 Increasel(Decrease) in Cash & Cash Equivalents 229,363 229,363 Cash and Cash Equivalaents at the beginning of the year - Increase/(Decrease) in Cash & Cash Equivalent 229,363 Cash and Cash Equivalents at the end of the year 229,363 The accompanying notes form an integral part of this financial statement. Zahid Hamdard Deputy Minister for Finance Ministry of Finance, Islamiic Republic of Afghanistan Dated: December 15, 2019 Afghanistan Strategic Grain Reserve Project World Bank Reference: Project ID P160606; Grant ID D2070 & A6345 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 QAWS 1397 (21 DECEMBER 2018) 1) LEGAL STATUS AND ACTIVITY a) The Afghanistan Strategic Grain Reserve Project was set up in July 2017. The objective of the project to establish a wheat strategic reserve to be available to Afghan households to meet their needs following emergency situations and improve the efficiency of the grain storage management. b) The project is financed by the following grants: i) Grant from the International Development Association bearing reference number D2070 in the amount of XDR 14,900,000 ii) Grant from Afghanistan Reconstruction Trust Fund bearing reference number A8443 in the amount of USD 9,686,895. c) The project consists of the following Parts: i) Institutional infrastructure and capacity building ii) Physical infrastructure iii) Project management d) The significant terms and conditions that determine or affect the availability of the funding assistance are primarily the presentation of eligible expenditures to donor within the period as per and in accordance with the financing agreement. e) These financial statements of the Project have been prepared in accordance with the requirements of the Grant Agreement signed between the Government of the Islamic Republic of Afghanistan and the International Development Association. 2) SIGNIFICANT ACCOUNTING POLICIES a) Basis of Preparation The financial statements are prepared under the historical cost convention and in accordance with Cash Basis IPSAS - Financial Reporting under the Cash Basis of Accounting issued by International Federation of Accountants (IFAC). b) Reporting Entity These financial statements are for the Project referred to in para 1(a) which is funded by the grant(s) as specified in para 1(b) and encompass the operations of the project to the extent funded by those grants. c) Receipts These represent grants and aid received during the period and the amount of taxes collected but not transferred until the end of the financial year. d) Payments Payments made from Special Account are recognised in the financial statements based on the date the cheque is issued and direct payments by World Bank are recognised on the date on which the withdrawal application for the payment is submitted to the World Bank. However, Afghanistan Strategic Grain Reserve Project World Bank Reference: Project ID P160606; Grant ID D2070 & A6345 cheques or withdrawal applications that were ultimately rejected by the bank or the World Bank are reversed in the reporting period. e) Currency translations Transactions in currencies other than the reporting currency are translated into US Dollar at the rate of exchange at which the transaction is actually executed. 3) NOTES TO ACCOUNTS a) Initial Advance Initial advance represents the amount of advance given by the World Bank into the designated account of the project. b) Reporting Currency The reporting currency is US Dollars. Since US Dollars is the principal disbursement currency of the donor, the financial statements are not prepared in the Afghani which is the currency of Afghanistan. c) Bank Charges The Ministry of Finance has negotiated with Da Afghanistan Bank that bank charges will not be charged on the transactions in the US Dollar Special bank account of the grant. Bank Charges may be levied by intermediary banks on deposits into the Special Account and balances returned to the World Bank. d) Property, Plant and Equipment As reported and certified by the project, the following categories of property plant and equipment in the amounts stated against each and measured at historical cost, were owned by the project at the end of the financial year. Only such items of individual assets, that cost more than AFA 5,000 are recognised for the purpose of inclusion herein. Category Cost in Afghanis Computers and Accessoris 2,835,200 Electric Equipment 259,500 Electronics 402,550 Office Furniture 949,400 Other Assets 299,800 Printers and Copiers 889,585 Security Equipment 109,400 Total 5,745,435 The items of assets as reported by the project have been regrouped and categorised to conform to the above categories. e) Comparison of Budget and Actual Amounts The Project, being the reporting entity for the purpose of these financial statements, in its capacity as such does not make its annual approved budget publicly available nor is its budget explicitly available publicly in the compiled approved budget in a manner purposeful to the context of these financial statements. Thus, the requirement of presenting a comparison of budget and actual amounts is not considered contextually applicable. Afghanistan Strategic Grain Reserve Project World Bank Reference: Project ID P160606; Grant ID D2070 & A6345 f) Previous year's figure This being the first year of the project's implementation, previous year's figures do not exist. g) Authorisation Date These Financial Statements are authorised by the Deputy Minister for Finance, Ministry of Finance on the date endorsed on the Statement of Cash Receipts and Payments. h) Appendices The accompanying appendices provide additional information and analysis and form an integral part of these notes, except as indicated otherwise. i) Others, These Financial Statements are originally prepared in English and then translated into Dari. In the event of any inconsistency between the English and Dari versions, the English version phAj' be considered to be correct, Afghanistan Strategic Grain Reserve Project World Bank Reference: Project ID P160606; Grant ID D2070 & A6345 APPENDIX Al SUMMARY OF WITHDRAWAL APPLICATIONS FOR THE YEAR ENDED 30 QAWS 1397 (21 DECEMBER 2018) Description Application Number Initial Advance Amount USD USD D2070: DA-A 3 193,437 Reimburse nelit 1 154,310 DA-A! 2 572,481 Afghanistan Strategic Grain Reserve Project World Bank Reference: Project ID P160606; Grant ID D2070 & A6345 APPENDIX A2 US Dollar SPECIAL ACCOUNT SUMMARY FOR THE YEAR ENDED 30 QAWS 1397 (21 DECEMBER 2018) Depository Bank: Da Afghanistan Bank Address: Kabul SA # 2765 USD Opening Balance as per Bank Statement Add: Receipts from Donor 765,918 765,918 Less: Payment for project expenditures 536,505 Bank Charges 50 536,555 Closing Balance as per B.S 30 QAWS 1397 (21 DECEMBER 2018) 229,363 Afghanistan Strategic Grain Reserve Project World Bank Reference: Project ID P160606; Grant ID D2070 & A6345 APPENDIX A3 US Dollar BANK RECONCILIATION FOR THE YEAR ENDED 30 QAWS 1397 (21 DECEMBER 2018) 27700 Account No: Depository Bank: Da Afghanistan Bank (DAB) Address: Kabul USD Closing Ba ance as per bank statement - 30 QAWS 1397 (21 DECEMBER 2018) 229,363 Closing balance as per financial stp1ements - 30 QAWS 1397 (21 DECEMBER 2018) 229,363 � � � N � � iC � N [L3 д0 � � Х С7 OD ра О ё �� в'�з я°�п_ й ш • ш � Q � � � � Е Е .� о t] е� с� t� и и гл сп а � � � � � � в а � из т r- аз �s,� и �л � � c�v � c�v cs� ото � � � � � гс' а' � а' � сп � °' �, м � aS оо � ci � � � � ц пs д _g � � .� С N у� �ай й� в ® °к�� � °о � а�гэ м м � � л Ф с[д г? 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