CPARTWE4

FINANCIAL ATTEST AUDIT REPORT

ON

THE ACCOUNTS OF WATER SECTOR CAPACITY BUILDING AND

ADVISORY PROJECT

FOR THE FINANCIAL YEAR 2017-18

International Development Agency (IDA) World Bank

Loan No. IDA-5760-PAK

AUDITOR-GENERAL OF PAKISTAN

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TABLE OF CONTENTS

Page

List of Abbreviations 1

Preface 2

PART-I 3

PROJECT OVERVIEW 4

AUDITOR'S REPORT TO THE MANAGEMENT 5

FUND ACCOUNTABILITY STATEMENT 6-17

PART-II 18

MANAGEMENT LETTER 19

EXECUTIVE SUMMARY 20

1. INTRODUCTION 21

2. AUDIT OBJECTIVES 21

3. AUDIT SCOPE AND METHODOLOGY 21

4. AUDIT FINDINGS & RECOMMINI)AlIONS 22

4.1 Financial Management 22

4.2 Overall Assessment 23

5. CONCLUSION 24

ACKNOWLEDGEMENT 25

Abbreviations and Acronyms

AF Additional Financing

FAS Fund Accountability Statement

FFC Federal Flood Commission

INTOSAI International Organization of Supreme Audit Institutions

IPSAS International Public Sector Accounting Standards

IRSA Indus River System Authority

ISSAls International Standards of Supreme Audit Institutions

IDA International Development Association

MoF Ministry of Finance

MoW Ministry of Water Resources

PC-II Planning Commission: Prolrma-ll

PMPIU ProJect Management and Policy Implementation Unit

WAPDA Water and Power Development Authority

WCAP Water Sector Capacity Building and Advisory Services Project

1

PREFACE

The Auditor-General of Pakistan conducts audit in terms of Article 169 and 170 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. The audit of Additional Financing for Water Sector Capacity Building and

Advisory Services Loan No. 5760 funded by International Development Association

(IDA) World Bank for the Financial Year 2017-18 was carried out accordingly.

The Directorate General of Audit, Water Resources conducted audit of the Project during

August 2018 for the Financial Year 2017-18 with a view to report significant findings to

the stakeholders. Audit examined the record with regard to economy, efficiency, and

effectiveness aspects of the Project. Audit also assessed, on the 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 any, will help the

management to realize the objectives of the Project.

The Report has of two parts: Part-I contains Auditor's Report (Audit Opinion) and Fund

Accountahiliiv Statement Part-ll contains Management Letter, Executive Summary and

Audit Findings.

The Report has been prepared for submission to International Development Association

(IDA) World Bank in terms of Loan Agreement for Additional Financing for Water

Sector Capacity Building and Advisory Services' bearing Loan No.5760.

Dated: i912.Z2I1 IRFA ANGIR WATTOOPlace: Lahore DIRECTOR GENERAL AUDIT

Water Resources Lahore

PART-I

1. PROJECT OVERVIEW

2. AUDITOR'S REPORT TO THE MANAGEMENT

3. FUND ACCOUNTABILITY STATE MENT

3

PROJECT OVERVIEW

Name of Project Water Sector Capacity Building andAdvisory Services Project (WCAP)

Sponsoring Authority 100% Funded By InternationalDevelopment Association World Bank

Executing Authority Ministry of Water Resources(PMPIU, FFC, WAPDA, IRSA)

Loan No. Loan No. 5760-PK

PC-LI Cost US S 34.95 million

Loan Amount US $ 34.95 million

Commencement Date of Project July, 2014(as per PC-1l)

Expected Date of Completion of Project June 30, 2021

Commencement Date of Loan February 05, 2016

Closing Date of Loan June 30, 2021

Loan Utilization Status during FY 2017-18 Rs. 112.018 million

4

AUDITOR'S REPORT TO THE MANAGEMENT

We have audited the Fund Accountability Statement (Pages 06 to 17) of Additional

Financing for Water Sector Capacity Building and Advisory Services Project funded by

International Development Agency (IDA) World Bank Loan No. 5760 for the Financial

Year 2017-18. The preparation of Fund Accountability Statement is the responsibility of

the management of the Project. Our responsibility is to express an opinion on the Fund

Accountability Statement based on our audit.

We have conducted our audit of the Fund Accountability Statement in accordance with

the International Standards of Supreme Audit Institutions (ISSAls), These standards

require that we plan and perform the audit to obtain reasonable assurance that the Fund

Accountability Statement is free of material misstatements. The audit is based on test

check basis and includes findings. evidence supporting the amounts and disclosures in the

Fund Accountability Statement. The audit also includes assessing the accounting

principles used and significant estimates made by management, as well as evaluating the

overall financial statement presentation. We believe that our audit provides reasonable

basis for our opinion.

In our opinion, the Fund Accountability Statement referred to above presents Iairly. in all

material respects, programme revenues, costs incurred and reimbursed during the period.

We have also issued our report in August 2018. on our consideration of WAPDA internal

control over financial reporting and our tests of its compliance with certain provisions of

laws and regulations. This report is an integral part of audit performed in accordance with

ISSAls and should be read in conjunction with this Independent Auditor's Report in

considering the results of our audit.

This report is intended for the information of WAPDA and World Bank.

Dated: 19 /.2. 2018 IRFAN JAHANGIR WATTOOPlace: Lahore DIRECTOR GENERAL AUDIT

Water Resources Lahore

5

FUND ACCOUNTABILITY STATEMENT

6

' WiER SECTOR CAPACITY BUILDING & ADVISORY SERVICES PROJECT (WCAP)STATEMENT OF CASH RECEIPTS AND PAYMENTSFOR THE YEAR ENDED JUNE 30, 2018

2018 Feburary 01, 2016 toJune 30, 2017

Receipts/ ReceiptslPayments Payments by Payments Payments byControlled Third Party Controlled Third Party

Note by the Project by the Project

Rupees Rupees Rupees Rupees

RECElPTSExternal Assistance - IDA 3 71,466,082 16,751,017 186,632,439Interest Earned 221,127 - 4,245

71,687,209 16,761,017 186,636,684

PAYMENTSConsultants Services 4 10,711,825 11,226,774Operating Expenses 5 26,847,054 29,551,045Goods 6 57,256,568 16,761,017 15,090,618Trainings and Workshops 7 - 3,705,977interest Deposited with Federal Treasury 8 221,127 4,245

95,036,574 16,761,017 59,578,659

(Decrease)lIncrease in cash (23,349,365) - 127 058 025

r,tv at the beginning of the year 127,058,534 50875

Cash at the end of the year 9 103,709,169 127 058,534

Contingencies and Commitments 10

The annexed notes 1 to 12 form an integral part of these financial statements-

Finance & Business a;agement Specialist Project Director

* WAT49 SECTOR CAPACITY BUILDING & ADVISORY SERVICES PROJECT (WCAP)STATEMENT OF COMPARISON OF BUDGETED AND ACTUAL AMOUNTSFOR THE YEAR ENDED JUNE 30,2018

2018 Feburary 01, 2016 to June 30, 2017

. -Original Surrendered RevisedBudgeted Amount Actual Amount Budg nt Aunte Budgeed Actual Amount

Note Budgeted Amount Amount Budgeted AmountNote

Rupees Rupees Rupees Rupees Rupees Rupees

RECEIPTS

External Assistance - IDA 3 50,000,000 88,227,099 200 000,000 47,710,000 152 290-000 186 632 439'nterest Ear ned 221,127 - - 4,245

50,000,000 88,448,226 200 000,000 47.710 000 152 290,000 186 636 684

PAYMENTS

Grants Subsidies and Write off Loans 50,000,000 111,797,591 200,000 000 47,710,000 152.290.000 59 57B 659Interest Deposited with Federal Treasury 221,127 4245

50,00,000 112,018,718 200,000,000 47,710,000 152,290.000 59,582904

The annexed notes I to 12 form an integral parlof Oese financial statements.

Finance & Businesi nagement Specialist Project 01rector

2

WATER SECTOR CAPACITY BUILDING & ADVISORY SERVICES PROJECT (WCAP)NOTES TO THE FINANCIAL STATEMENTS

-4 FOR THE YEAR ENDED JUNE 30, 2018

1 Reporting Entity

The financial statements are for additional financing of "Water Sector Capacity Building & Advisory ServicesProject" (the Project). The financial statements encompass the reporting entity as defined in the FinancingAgreement between the Islamic Republic of Pakistan and International Development Association. The FinancingAgreement was signed on 27th January 2016 for an amount of SDR 2510 million, equivalent to US$ 34.95million, and became effective on 5th February, 2016.The Project's objective is to improve management and investment planning of water resources in the Indus RiverBasin. Project Management & Policy Implementation Unit (PMPIU), Water and Power Development Authority(WAPDA). The project has following three components after restructuring:

Component A 1: Capacity Building of and Support to Federal Institutions in Water Resources Planning andManagement (US$ 6.07 million)

Component A 2: Capacity Building in system planning management and Operations (US$ 2.50 million)Component B: Improvement in Water Resources Management and Development (US$ 17.15 million).Component C: Project Management Coordination, Strategic Studies, Training (US$ 7.23 million)

The project controls its own Designated US Dollar Bank Account. Funds are recived from IDA-WB according toprojected financial requirements in line with Financing Agreement into the Project's designated bank account.WAPDA and IRSA have been allowed 'revolving-fund (imprest) accounts' for the purpose of the project, as perapproved revised PC-11 and Additional Disbursement Instructions of Loan Agreement.

2 Significant Accounting Policies

Following accounting policies have been consistently applied throughout the financial year.

2.1 Basis of Preparation

The financial statements have been prepared in accordance with Cash Basis IPSAS, Financial Reporting UnderThe Cash Basis of Accounting.

2.2 Reporting Currency

The reporting currency is Pak Rupees.

2.3 Revenue Recognition

Revenue is recognized on the date of receipt of money by the bank or clearance of cheque. Revenue isrecognized on a gross basis and any related costs are recorded separately.

2.4 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.

3

2.5 Foreign Currency Transactions

Transactions in foreign currencies are accounted for in compliance with the Finance Division 0. M. No. F.2. (1)BR-112007-949 dated 02.08.2013.

Cash receipts and payments arising from transactions in foreign currencies are recorded in Pak Rupee byapplying to the foreign currency amount, the exchange rate between the Pak Rupee and the Foreign Currencyat the date of the receipts and payments on FIrst-in-First-Out basis(FIFO).

2.6 Employee Terminal Benefits

Service benefits of government deputations employees are accounted for in their respective departments whileno service terminal benefits are paid to the contractual employees.

2.7 Payments by Third Party

Third Party Payments represent direct payments made by IDA-WB to the suppliers/contractor/ServiceProvider/Consultants on behalf of the project for goods and services procured by the Project.

2.8 Depreciation

As the project is neither a profit earning nor an autonomous entity hence, fixed assets are reported at cost anddepreciation is not accounted for in the books. However, it is calculated for the sake to determine written downvalue of the reported assets at the year end. Written down balance method is applied for the calculation ofdepreciation of the assets

4

7q EXTERNAL ASSISTANCE - IDA

External assistance was received in the form of credit from International Development Association (IDA) under financingagreement bearing loan No.5760-Pk dated January 27, 2016 between IDA and GOP for the purpose of the Project. The creditbecame effective on Feburary 05, 2016. The following amounts were received by the Project during the period.

Feburary 01,2016 toNote June 30,2017

US$ Rupees US$ Rupees

IDA - Report Based Procedures 3.1 678,000.00 71,466,082 1,782,516 186,632,439

IDA - Direct Payment 3.2 144,77233 16,761,017 _ -

Total 822,772.33 88,227,099 1,782,516 186,632,439

3.1 This represents funds transferred to the Projecfs Designated US Dollar Bank Account by IDA against Withdrawal Applicationssubmitted by the Project on the basis of Quarterly Interim Unaudited Financial Reports.

3.2 Direct payments represent amount paid directly by IDA on behalf of the project in respect of goods and services procured by theProject. There is no Direct Payment in the Audit Period.

3.3 There has been no instance of non compliance with the terms and conditions of the financing agreement between IDA and GOPwhich have resulted in cancellation of IDA Credit.

3.4 Undrawn External Assistance

Undrawn IDA credit No.5760 at reporting date (June 30, 2018) represent the undisbursed balance of the financing agreementbetween IDA and GOP.

Feburary 01,20162018 to

June 30,2017

US$ US$Closing Balance 32,344,712 33,167,484

5

Feburary 01,20162018 to

June 30,2017Note Rupees Rupees

4 CONSULTANT SERVICES

Individuals 4.1 10,711,825 11,226,774

10,711,825 11,226 774

4.1 Individual Consultants of PMPIU have been hired for Capacity Building of the Implementing Agencies.

Feburary 01,20162018 to

June 30,2017Note Rupees Rupees

5 INCREMENTAL OPERATING EXPENSES

Salaries and Honorarium 5.1 16,710,936 14,591,715Operating Expenditures 5.2 10,136,118 14,959,330

26,847,054 29.551,045

5.1 Salaries and Honorarium

Salaries - Staff 15,033,436 13,095,276Honorarium 1,677,500 1,496,439

15,710,936 14,591,715

5.2 Operating Expenditures

TeLephone/Telex and Internet 555,575 2,606,205

Newspapers, Periodicals, Books etc. 26,706 37,969Courier, Post and Telegraph 38,660 72,174

Utilities (Gas, Water, Electricity) 154,144

Publicity and Advertisement 301,926 377,731

Repair and Maintenance 4,523,346 2,161 415

POL and Vehicle Repairs 2,015,708 5,532,004

Stationery & Accessaries 1,603,788 1,226,243

Travelling Expenses 403,261 592,735

Uniform and Liveries 355,912Entertainment 158,959 151,468

Cost of External Reviewers 500,000Other Expenses 498,189 1,191.330

10,136,118 14.959,330

6

Feburary 01,20162018 to

June 30,2017

6 GOODS

- Vehicles

Furniture and Fixture 2,333,903 24.800

Office Equipment 71,683,682 15,065,818

74,017,585 15,090.618

7 TRAINING AND WORKSHOP

International Training 3,383,324Local Training, Workshop, Seminar - 322,653

-_ 3,705,977

8 INTEREST EARNED AND DEPOSITED

Revolving Fund Imprest Account No.3000648505 had been opened by WAPDA under the title of General Manager (C&M) Water(WCAP) with NBP Wapda House Branch, Lahore. Credit for "Interest Earned" is received biannually and depositedintoFederalTreasury as matured.

Feburary 01,2016to June 30,2017

9 CASH AND BANK BALANCES

Petty cash in Hand - PMPlU 25 1,455

Cash at Bank Book - PMPIU 103,704,875 122,805,271Cash at Bank Book -WAPDA 3,761 4,251,299Cash at Bank Book - IRSA 508 -

Balance of Cr.No.4437 of IRSA & WAPDA - 509

103,709,169 127,058.534

9.1 UNREALIZED EXCHANGE GAIN

There is no gain or loss in exchange as the payments are recorded at the exchange rate of receipt of funds by State Bank ofPakistan. and First - in First - Out method is applied.

10 CONTINGENCIES AND COMMITMENTS

Commitments/Contingent for CMTL on accout of exchange rate variations 2,514,132

11 AUTHORIZATION FOR ISSUE

These financial statements have been authorized for issue by the Project Director on g

12 GENERAL

Figures have been rounded off to the nearest rupee.

Comparative figures have been rearranged where necessary for the purpose of comparison

Finance & Busine anagement Specialist Project Director

7

Bank Reconciliatioh Statement of N'BP Account 3000648505 (Old Alc #200060-5) WCAP in respect of General Manager (C&M) Water for the

mort of 06/2018

Balance as per Cash Book as on 30.06.2018 Rs. 3,761.00

Add: Cheque issued but not presented into Bank

Cheque # Date Armount Rs.49489471 26106/2018 57,754.00 (+) Rs. 57,754.00

Balance as per Bank Statement Rs. 61,515.00

Sr.Accounts Officer,(C&M) Water, WAPDA, Lahore.

National Bank of PakistanAccount Statement

AccountTitle(s) GENERAL MANAGER (C&M) WATER WAPDA (WCCHULAM RASOOL IOBAL SIG HAJI GHULAM NAE Town:

Address: 530-WAPDA HOUSE LAHORE. District

City: LAHOREProvinceState: PUNJAB

Country: PAKISTAN

IPostal Cåde: Product Name: National Incorna Daily AccountCurrency: PKR

rtnch Code/Narne: 416 Wapda House Branch Lahore CIF No: 58206Region Name: Lahore Central Account No: 3000648505

taternent Prining Date 05-Jul-2018 IBAN: PK79NBPA0416003000648505

aer. 00007948 Branch: 416 Terminal: IHR-0416-PC33

BIF Balance: 11798.00

Frorn. 01-Jun-2018 To 30-Jun-2018

9. No. Date Particulars Insino Memo Debit Credit Balance1 08-Jun-2018 ¯FRANSFER DV 1.856,00 00 9.94200

2 20-Jun-2018 DR VOUCHER DV 124 00 000 9 818.00

3 20-Jun-2018 TRANSFER 000 98.065 00 10788300

4 27-Jun-2018 CLEARING 49489469 33,578.00 000 74 305 O

5 28 Jun-2018 TRANSFER 4947410 12,790.00 000 61.51500

Total 1 Credit transactions of anount: 98,065.00

Total 4 Debit transactions of amount: 48,348.00

This is a computer generated statement and does not require any signature Page 1 of I

INDUS RIVER SYSTEM AUTHORITY

BANK RECONCILIATION STATEMENT FOR THE MONTH OF 06/2018.

IRSA WCAP Account No: 6843-0 at National Bank of Pakistan Main Branch,Islamabad.

Balance as per Cash Book. 507.80

Add Cheque issued but not yet presented for Payment.

Sr. No Cheque No Date Amount

1 55273200 27-06-2018 4 184300

2 55273203 29 062018 33,934.00

75,777.00Less CHEQUE DEPOSITED BUT NOT CREDITED IN THE ACCOUNT.

Balance as per Bank Statement. 76,284.80

Budget &Accounts Officern us Ri Syster Authority

File Name Bank Reconciliation Statement NBP (E)

National Bank of PakistanAccount Statement

AccOcilt Tit1e{s~ ISA WCAP>

Town:

Airebs. ILCY:, H-3 M,,RK/1 G 7 51AP District:

MMIIKIH3 IS AMAISAi City: 'S AM,A RPuovince/SIate: CAPITAL

Country: PAKISTAN

Gorle: Product Namre:

Currency:Aaeci CodLeNamo 341 Main Branch islamabad CIF Mc; 2291215

Region Name: -edefl Capite . Account No: 40352528fi

b ;:cntint Prining Date: 03-Jul2018 BAN: I<15N4PA0341003.5252BP3

er 011641 Irriec: 2164 rerminW. PC2-2364-LSL

[IL ilotance: 76.598 80

ruim: D[$12' to '.0-Je c-2018

I)a Dc IPartcu[l17s tistio Memro Del>i1 Cielil liaazce

m. U d T/\SI¯Y¯I 55273201 15/ 00 0 L ,3:1 r .

3tJ Gß ANSI liR 55?/3202 '5/ 00t i Pi::.

Tut&i 0 Credit Iranisaction, of amnount: 0.0

¯Iutai 2 Oc >i)i traisaciens ot armounl: 314 00

idu

Thiqs rnicmputer generaitrd 1ttyircnl aknd docr net roquire any signaturc- Pa(Ic 1 etI