World Bank Documentdocuments.worldbank.org/curated/en/360531543483278306/... · 2018-11-30 ·...

AUDITOR REPORT

No. Project Gran 1Project Name

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29 P29663 505& Systemn Enhan cement for Healt Action i

___ ______ HF8290 T ransition Project

WORLD BANK PROJECTYEAR ENDED 21 DECEMBER 2017

DIREC TORATE OF THE GRAN TS AUDIT

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Supreme Audit OfficeGovernment of Islamic Republic of Afghanistan

Auditor's Report

Date: November 25, 2018

c r of Finance,.Go fi0ment of Islaic Republic of AfghanistanKabul

Independent Auditors' Report on the Financial Statements

1. We have audited the accompanying statements of Cash Receipts and Payments (the"Financial Statements") of the System Enhancement for Health Action in TransitionProject bearing World Bank Project ID number P129663 financed under Grant Number95961, 15005 & H8290 (hereinafter referred to as the "Project") for the financial yearended 30 Qaws of Solar Year 1396 (21 December 2016 to 21 December 2017), and asummary of significant accounting policies and other explanatory notes forming part of theFinancial Statements.

The Ministry of Finance's Responsibility for the Financial Statements and Compliancewith Grant Agreement

2. The Ministry of Finance (the "Ministry") is responsible for preparation and fairpresentation of the Financial Statements in accordance with International Public SectorAccounting Standard "Financial Reporting under the Cash Basis of Accounting." Thisresponsibility includes designing, implementing and maintaining internal control relevantto the preparation and fair presentation of the financial statements which are free frommaterial misstatement, whether due to fraud or error; selecting and applying appropriateaccounting policies; and making accounting estimates that are reasonable in thecircumstances.

3. In addition, the Ministry is also responsible for ensuring that the activities, financialtransactions and information reflected in the financial statements are in compliance withthe Project's Grant Agreement. The Grant Agreement Numbers 95961, 15005 & H8290dated 16 June 2013; 27 August 2013 and 28 February 2013 respectively entered intobetween the Islamic Republic of Afghanistan and the International Development

Page 1 of 3

Association for the provision of $6,737,204; $480,000,000 and SDR 65,100,000respectively for funding to the Project.

Auditor's Responsibility

4. Our responsibility is to express an opinion on these Financial Statements based on ouraudit. We have conducted audit of the financial statements, project operations and relatedinternal controls in accordance with International Standards of Supreme Audit Institutions("ISSAls"). Those Standards require that SAO comply with ethical regulations and planand perform the audit to obtain reasonable assurance of the financial statements being freefrom material misstatement. Those standards require that SAO express its opinion onwhether the financial statements present fairly, in all material respects, the cash receiptsand payments of the project.

5. In addition to the responsibility to express an opinion on the financial statements describedabove, our responsibility includes expressing an opinion on whether the activities,financial transactions and information reflected in the financial statements are, in allmaterial respects, in compliance with the Project's Grant Agreement. This responsibilityincludes performing procedures to obtain audit evidence about whether all payments andreceipts are in compliance with the terms and conditions of Grant Agreement.

6. An audit involves performing procedures to obtain reasonable and appropriate auditevidence about the amounts and disclosures in the financial statements. The proceduresselected depend on the auditor's judgement, including the assessment of the risks ofmaterial misstatement of the financial statements, whether due to fraud or error. In makingthe risk assessments, internal controls relevant to the entity's preparation and presentationof financial statements are considered in order to design audit procedures that areappropriate in the circumstances, but not for the purposes of expressing an opinion on theeffectiveness of internal controls. An audit also includes evaluating the appropriateness ofaccounting policies used, the reasonableness of accounting estimates made bymanagement, as well as evaluating the presentation of the financial statements.

7. We believe that the audit evidence we have obtained is reasonable and appropriate toprovide a basis for our opinion.

Opinion

8. In our opinion the Financial Statements present fairly, in all material respects, cashreceipts and payments of the System Enhancement for Health Action in Transition Projectbearing World Bank Project ID number P129663 financed under Grant Number 95961,15005 & H8290 for the financial year ended 30 Qaws of Solar Year 1396 (21 December2016 to 21 December 2017) in accordance with International Public Sector AccountingStandard "Financial Reporting under the Cash Basis of Accounting."

9. In our opinion, in all material respects, the activities, financial transactions andinforma tIreflected in the financial statements are in compliance with the terms andcon i Project's Grant Agreement.

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10. Management Letter, attached to this Audit Report, highlights areas of improvement infinancial management including compliance with financial covenants of the GrantAgreements and of results of its operations for the financial year ended 30 Qaws of SolarYear 1396 (21 December 2016 to 21 December 2017). These observations andrecommendations have been communicated to and discussed with the Project and areintended to improve internal controls and result in other operating efficiencies of theProject.

Dr. Mohammad S arif SharifiAuditor General of fghanistan

me udit Ofice'abul, tan

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Islamic Republic of Afghanistan

System Enhancement for Health Action inTransition Project

World Bank Reference: Project ID P129663; Grant ID 95961, 15005 & H8290

Financial Statements for the year ended

3 0 th Qaws 1396 ( 2 1st December, 2017)

System Enhancement for Health Action in Transition ProjectWorld Bank Reference: Project ID P129663; Grant ID 95961, 15005 & 118290

STATEMENT OF CASH RECEIPTS AND PAYMENTSFOR THE YEAR ENDED 30 QAWS 1396 (21 DECEMBER 2017)

1396 1395Receipts/Payments Payments

Controlled by by Third Cumulativeentity Parties Total Total To DateUSD USD USD USD USD

RECEIPTSInitial Advance - - 47,385,384Replenishments 66,845,274 66,845,274 71,694,157 256,772,103Direct Payment - 52,893,760 52,893,760 55,202,803 185,270,405

TOTAL RECEIPTS 66,845,274 52,893,760 119,739,034 126,896,960 489,427,892

PAYMENTS

Disbursement Category:Goods, Works, Non-Consulting Services,Consultant's Services, Training and IncrementalOperating Costs 87,426,569 52,893,760 140,320,329 125,129,032 481,134,024Refund to Donor - - 1,800,000 1,800,000Bank Charges 275 - 275 475 1,975

TOTAL PAYMENTS 87,426,844 52,893,760 140,320,604 126,929,507 482,935,999

EXCESS OF RECEIPTS OVER PAYMENTS (20,581,570) - (20,581,570) (32,547) 6,491,893Taminat (net) 92,452 - 92,452 15,196 127,136Exchange Gain/(Loss) (11,469) - (11,469) - (11,469)Increase/(Decrease) in Cash & Cash Equivalents (20,500,587)- (20,500,587) (17,351) 6,607,560

Cash and Cash Equivalaents at the beginning ofthe year 27,732,407 - 27,732,407 27,749,758 624,260Increase/(Decrease) in Cash & Cash Equivalent (20,500,587) - (20,500,587) (17,351) 6,607,560Cash and Cash Equivalents at the end of the year 7,231,820 7,231,820 27,732,407 7,231,820

The accompan ing notes im an integral part of this financi rt

Khali dDeputy Mi er fo Financ

Ministry of Finance, slamic Republic of Afghanistan

Dated: November 24, 018

System Enhancement for Health Action in Transition ProjectWorld Bank Reference: Project ID P129663; Grant ID 95961, 15005 & H8290

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 QAWS 1396 (21 DECEMBER 2017)

1) LEGAL STATUS AND ACTIVITY

a) The System Enhancement for Health Action in Transition Project was set up in August 2013.The objective of the Project is to expand the scope, quality and coverage of health servicesprovided to the population, particularly to the poor, in the Project areas, and to enhance thestewardship functions of the Ministry of Public Health.

b) The project is funded by a grant bearing number 15005 from the Afghanistan ReconstructionTrust Fund in the amount of USD 100,000,000 and another grant from the InternationalDevelopment Association in the amount of SDR 65,100,000 grant bearing reference numberH8920. The amount of grant number 15005 was later in increased to USD 480,000,000.

Yet another grant bearing reference number 95961 from the Afghanistan ReconstructionTrust Fund which was, until the fiscal year 1391, being included as part of another projectnamely Strengthening Health Activities for the Rural Poor (SHARP) having Project ID asP112446 by the donor and was thus reported in the audited financial statements of theSHARP project, upon effectiveness of this project has been discontinued to be included underthe SHARP by the donor and got included under this project. Consequently, funds amountingto USD 6,737,204 available under that said grant at the end of the fiscal year 1391 have beenincluded for the purposes of this Project.

c) The project consists of the following Parts:i) Basic Package of Health Services and the Essential Package of Hospital Servicesii) MoPH Stewardship Capacity and System Developmentiii) Project Management

d) The significant terms and conditions that determine or affect the availability of the fundingassistance are primarily the presentation of eligible expenditures to donor within the period asper and in accordance with the financing agreement.

e) These financial statements of the Project have been prepared in accordance with therequirements of the Grant Agreement signed between the Government of the IslamicRepublic of Afghanistan and the International Development Association.

2) SIGNIFICANT ACCOUNTING POLICIES

a) Basis of PreparationThe financial statements are prepared under the historical cost convention and in accordancewith Cash Basis IPSAS - Financial Reporting under the Cash Basis of Accounting issued byInternational Federation of Accountants (IFAC).

b) Reporting EntityThese financial statements are for the Project referred to in para 1(a) which is funded by thegrant(s) as specified in para 1(b) and encompass the operations of the project to the extentfunded by those grant(s).

c) ReceiptThes e grants and aid received during the period and the amount of taxes collectedbut Yr ed until the end of the financial year.

UAf


d) PaymentsPayments made from Special Account are recognised in the financial statements based onthe date the cheque is issued and direct payments by World Bank are recognised on the dateon which the withdrawal application for the payment is submitted to the World Bank. However,cheques or withdrawal applications that were ultimately rejected by the bank or the WorldBank are reversed in the reporting period.

e) Currency translationsTransactions in currencies other than the reporting currency are translated into US Dollar atthe rate of exchange at which the transaction is actually executed.

3) NOTES TO ACCOUNTS

a) Initial AdvanceInitial advance represents the advance given by the World Bank to open the special accountless withdrawal applications approved by the World Bank but not paid to the special accountbecause they were directed toward a reduction in the Initial advance.

b) Reporting CurrencyThe reporting currency is US Dollars. Since US Dollars is the principal disbursement currencyof the donor, the financial statements are not prepared in the Afghani which is the currency ofAfghanistan.

c) Bank ChargesThe Ministry of Finance has negotiated with Da Afghanistan Bank that bank charges will notbe charged on the transactions in the US Dollar Special bank account of the grant. BankCharges may be levied by intermediary banks on deposits into the Special Account andbalances returned to the World Bank.

d) Payments made by third partiesThese represent payments directly made by the World Bank, on basis of requests submittedby the Ministry of Finance in form of a withdrawal application, towards settlement of theclaims, liabilities and contractual obligations against contracts and agreements for eligibleexpenditures of the project as per the financing agreement. These payments do not constitutecash receipts or payments by the entity and as such are disclosed in the "Payments by ThirdParty" column in the statement of Cash Receipts and Payments.

e) TaminatThe amount of Taminat reported in the Financial Statements represents net flow arising fromdeduction/repayment of security deposit (retention money) during the reporting period.

f) Exchange Gain/LossThe amount of Exchange Gain/Loss reported in the Financial Statements represents notionaldifference in amount of refunds denominated in Afghanis and recognised in the prior periodsbut credited to the designated account of the project only during the current reporting period.

g) Comparison of Budget and Actual AmountsThe Project, being the reporting entity for the purpose of these financial statements, in itscapac such does not make its annual approved budget publicly available nor is itsb x licitly available publicly in the compiled approved budget in a manner purposeful to1e# of these financial statements. Thus, the requirement of presenting a comparison

t and actual amounts is not considered contextually applicable.

4


h) Authorisation DateThese Financial Statements are authorised by the Deputy Minister for Finance, Ministry ofFinance or any official acting on his behalf who has been so authorised to act on the dateendorsed on the Statement of Cash Receipts and Payments,

i) AppendicesThe accompanying appendices provide additional information and analysis and form anintegral part of these notes, except as indicated otherwise.

j) OthersThese Financial Statements are originally prepared in English and then translated into Dan, Inthe event of any inconsistency between the English and Dari versions, the English versionshall be consi del to be correct.

EC,


APPENDIX Al

SUMMARY OF WITHDRAWAL APPLICATIONSFOR THE YEAR ENDED 30 QAWS 1396 (21 DECEMBER 2017)

Description Application Number Initial Advance Amount

USD USD

15005:

Direct Payment 163 925,766Direct Payment 180 3,411,713Direct Payment 167 2,350,612Direct Payment 176 1,567,877Direct Payment 181 1,496,656Direct Payment 175 747,105Direct Payment 161 878,691Direct Payment 164 1,503,619Direct Payment 173 853,888Direct Payment 179 1,240,805Direct Payment 174 1,101,782Direct Payment 172 1,022,248Direct Payment 177 1,506,146Direct Payment 178 1,442,571Direct Payment 160 1,119,964Direct Payment 170 2,424,641Direct Payment 166 866,490Direct Payment 165 1,382,205

DA-2 182 5,740,184Direct Payment 171 1,394,861Direct Payment 156 1,463,665Direct Payment 159 972,745Direct Payment 157 1,754,313Direct Payment 162 1,225,801Direct Payment 158 794,087

DA-2 155 8,970,820DA-2 154 1,883,403DA-2 153 14,180,647DA-2 152 15,291,257DA-2 151 7,278,496

Direct Payment 143 1,205,222Direct Payment 145 1,712,340Direct Payment 141 1,417,243Direct Payment 142 1,347,834Direct Payment 144 1,084,882Direct Payment 135 1,149,139Direct Payment 140 1,453,508Direct Payment 147 1,082,439Direct Payment 149 746,471Direct Payment 146 1,005,846Direct Payment 139 858,764

DA-2 150 14,149


APPENDIX Al

SUMMARY OF WITHDRAWAL APPLICATIONSFOR THE YEAR ENDED 30 QAWS 1396 (21 DECEMBER 2017)

Description Application Number Initial Advance Amount

USD USD

Direct Payment 134 870,990Direct Payment 137 740,096Direct Payment 138 1,674,872

DA-2 132 231,018Direct Payment 131 847,989Direct Payment 130 1,229,499Direct Payment 133 1,018,375

DA-2 129 2,994,929DA-2 128 10,035,523

119,514,18695691:

DA 21 224,848224,848

System Enhancement for Health Action in Transition ProjectWorld Bank Reference: Project ID P129663; Grant ID 95961, 15005 & 118290

APPENDIX A2

US Dollar SPECIAL ACCOUNT SUMMARYFOR THE YEAR ENDED 30 QAWS 1396 (21 DECEMBER 2017)

Depository Bank: Da Afghanistan BankAddress: Kabul

SA #27362 SA # 27499 SA # 27515USD USD USD

Opening Balance as per Bank Statement 769,284 9,699,121 16,890,477

Add:Intiai AdvanceReplenishments 224,848 66,620,426Credit against refunds deposited to other account in prior year 307,781 54,260Credit against excess debit in prior year 15

224,848 307,781 66,874,701Less:

Payment for project expenditures 310,796 6,065,552 80,956,462Refunds not deposited into these accounts 2,831 25,425 5,529Bank Charges 25 250

313,652 6,090,977 80,962,241

Closing Balance as j .S 30 QAWS 1396 (21 DECEMBER 2017) 680,480 3,915,925 2,602,937

N1k4


APPENDIX A3US Dollar BANK RECONCILIATION

FOR THE YEAR ENDED 30 QAWS 1396 (21 DECEMBER 2017)

Depository Bank: Da Afghanistan Bank (DAB)Address: Kabul

USD

Closing Balance as per bank statement - 30 QAWS 1396 (21 DECEMBER 2017)A/c No. 27362 680,480A/c No. 27499 3,915,925A/c No. 27515 2,602,937 7,199,342

Add:Refunds not deposited into these accounts 33,785

Less:Cheque No. 2751560836 debited by bank to other account (1,307)

Closing balance as e al statements - 30 QAWS 1396 (21 DECEMBER 2017) 7,231,820

NT9


APPENDIX A4COMPONENT-WISE DISBURSEMENTS

FOR THE YEAR ENDED 30 QAWS 1396 (21 DECEMBER 2017)

Cumulative toComponents 1395 1396 Date

USD USD USD

Basic Package of Health Services and the Essential Package ofHospital Services 116,218,808 133,015,358 451,653,957MoPH Stewardship Capacity and System Development 4,624,512 2,571,449 10,681,975Results based Financing 813,714 310,794 5,506,780Project Management 3,471,998 4,422,729 13,291,313Bank Charges 475 275 1,975

TOTAL PAYMENTS 125,129,507 140,320,604 481,135,999

stem Enhancement for Health Action in Transition Project

World Bank Reference: Project ID P129663; Grant ID 95961, 15005 & H8290

Appendix ASSTATEMENT OF ESTIMATED GRANT AMOUNT

FOR THE YEAR ENDED 30 QAWS 1396 (21 DECEMBER 2017)(M-morandum Statement - eal an Integral pad ofth. Financial Statements)

Amount95691 15005 H8290 Total

In currency of commitmentAmount of Grant' USD 8,408,309 USD 480,000,000 XDR 65,100,000Amount disbursed by World Bank untill the end of 1396' USD 7,847,405 USD 385,5868,814 XDR 64,905,082Undisbursed Balance USD 760,905 USD 94,413,186 XDR 194,918

In reporting currencyAmount disbursed by World Bank until the end of 1 396 3 USD 7,647.405 USD 385,586,814 USC 94,393,774 USD 487,627.992Equivalent US Dollars for Undisbursed amount USD 760.905 USD 94,413,186 USD 276,784 USD 95,450.874

Total estimated amount of Grant Funds available USD 8408,309 USD 480,000,000 UJSD 94,570,559 USD 583,078,867

Cumulative payments for Expenditure as per the Statement of Cash Receipts & Payments5 USD 481,020.332

1 Amount of Grant for Grant ID 95981 as included herein represents the unspent balance of the grant as at the end of financial year 1391 and the totalamount of the grant. This is due to the fact that until the end of financial year 1391, this grant was being included as part of another project namelyStrengthening Health Activities for the Rural Poor (SHARP) having Project ID as P112446 by the donor and was thus reported in the auditedfinancial statements of the SHARP project. Upon effectiveness of this project, the said grant has been discontinued to be included under the SHARPby the donor. Consequently, funds available for this project on account of the said grant have been taken as the total amount of grant as reduced bythe amount reported as disbursed under SHARP as per the audited financial statements of SHARP, which represent the unspent balance of thegrant funds as at the end of financial year 1391.

2. Actual amounts of total disbursement made by the World Bank since the beginning of the project as available from Client Connection in currency ofcommitment. However, in respect of grant 95961, this amount represents disbursement made by the donor since FY 1392 for reason mentioned in 1supra.

3 Actual amounts of total disbursement made by the World Bank since the beginning of the project as available from Client Connection in USDDollars. However, in respect of grant 95961, this amount represents disbursement made by the deor during the current reporting period for reasonmentioned in 1 supra.

4. The amount of equivalent US Dollars for undisbursed balance of the grant where the currenct of commitment of the grant is XDR (in the currency ofcommitment) has been calculated at the exchange rate of 1.42 USD per XDR which is the rate published by the World Bank as at last day of thefinancial year.

5. The amount reported includes, in respect of grant 95961 payments from financial year 1392 only for reason mentioned in 1 supra.

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