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Supreme Audit OfficeGovernment of Islamic Republic of Afghanistan

Auditor's Report

Date: 0 1 December 20 18To,HE-Minister of Finance,

Government of Islamic Republic of Afghanistan

Kabul

Independent Auditors' Report on the Financial Statements

1. We ha e aUdited the accoinpanNAncy statements of Cash Receipts and Payments (the

--Financial Statements-) ofCitizcn Chailer Af-hanistan Project, Grant NLIniber: TFA 03827

& D 1390AF, World Bank Project 11): P160567. (hereinal-tcr rct'erred to as the -*Pro ' ject-) for

the Near ended A QaNN's of Fiscal Year 1396 (2 1 Decernber2016 to 21 December 201 7) and

the SL1111n-iar\ of significant accOLIFItInEy Policies and other explanator notes-

The Ministry.- of Finance's Responsibility for the Financial Statements

2. The Ministry of Finance (the -Ministry"") is responsible for preparation and I'all,

prcsentation of the Financial Statenients in accordance with International I'LlbliC Sector

AccOUntinly Standards *"Financial Rcpoillng under the Cash Basis of ACCOUntill"." This

responsl I IY inClUdes designing, unplenicn(Ing and maintan-uno internal control rele\'ant to

the preparation and fiair presentation of the financial staternents which are free from inaterial

niisstatenient, whether dUC to fraud or error.- selecting and applying appropriate accotinting

policlei- and making acCOUnting estimates that are reasonable in the cirCUnistanccs.

In addition to the responsibilit\, for the preparation and presentation of the financial

statement,, described aboNre. the Ministry"s policy is also responsible fOr C11SUring that the

activities. firiancial transactions and information reflected in the financial statements are III

corripliance with the Grant Agreement TFA 03827 & D-LIMAF entered into beMeen thePuac 2 o1A

slamic Republic of Afghanistan and the International Development Association acting as

administrator of grant funds for the provision of USD 478 Million funding of the ProJect.

Auditor's Responsibility

4. Our responsibility is to express an opinion on these Financial Statenents based on our

audit. Wc have conducted audit of te financial statements, project operations and related

niernal controls in accordance with the International Standards of Supreme Audit Institutions

(-ISSAIs-). Those standards require that SAO comply with the ethical regulations and plan

and perlorm the audit to obtain reasonable assuranec of the financial statements being frec

from material misstaternent. Those Standards require that SAO express its opinion on

w hether the financial statements present fairly, in all material respeets, the cash receipis and

pavments ofthe Project.

I ln addition to the responsibilit to express an opinion 0n the financial statements

described above, our responsibility includes expressing an opinion on whether the activities,

financial transactions and information reflected in the financial statements are., in all material

respects, in compliance with the ProJect's Grant agreement. This responsibility includes

perforring procedures to obtain audit evidence about whether all pavments and receipts are

in compliance with the terms and conditions of the Grant Agreement.

6. An audit involves performing procedures to obtain sufficient and appropriate audit

cvidence about the amount sand disclosures in the financial statemenits. The procedures

selected depend on the auditor's judgement. ineluding the assessment of the risks of material

misstatenent of the financial statements, whether duc to fraud or error. In making the risk

assessments. internal controls relevant to the entity's preparation and presentation of Inancial

statements are considered in order to design audit procedures that are appropriate in the

circumstances, but not for the purposes of expressing an opinion on Ilie effectiveness of

internal control. An audit also includes evaluating the appropriateness of accounting policies

used. Ilie reasonableness of accounting estimates made by management. as well as evaluating

the presentation of the financial statenents.

7. We believe that the audit evidence we have obtained is reasonable and appropriate to

provide a basis for our opinion.

Opinion

8. In our opinion, the Financial Statements present fairly, in all material respects. cash

receipts and payments of the Citizen Charter Afghanistan Project, Grant Number: TFA 03827

& D 1 390AF, World Bank Project ID: Pl60567, for the year ended 30 Qaws of iscal Year

1396 (2 1 December 2016 to 21 December 2017) in accordane with International Public

Seetor Accounting Standards "Financial Reporting under the Cash Basis of Accounting.

Page 3 of4

'Ä -

9. In our opinion, in all material respects. the activities. financial transactions and

inflormation reflected in the financial statements are in compliance with the terms and

conditions of the Grant Agrecment.

10. Management Letter, attaehed to this Audit Report, highlights areas of improvement in

financial managerment including compfiance with linancial covenants of the Grant Agreement

and of results of its operations tr the 30 Qaws of Fiseal Year l 396 ( 2 l December 20 l 6 to

21 December 2017 ). These observations and recommerndations have been communieated to

and diseiissecl with the ProJeet and are intended to improve internal controls and result in

other operating efficiencies of the Projeet.

Dr. Moham d Sharif "Sharifi"Auditor Gene al of Afghanistan

cIele t Office

4 A anistan

Page 4 of4

Islamic Republic of Afghanistan

Citizens' Charter Afghanistan ProjectWorld Bank Reference: Project ID P160567; Grant ID D1390, D2130, A3827

Financial Statements for the year ended

3 0 th Qaws 1396 (21st December, 2017)

-r, -- ------ -

Citizens' Charter Afghanistan ProjectWorld Bank Reference: Project ID P160567; Grant I) D1390, D2130, A3827

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

1396 CumulativeReceipts/ To Date

PaymentsControlled by

entityUSD USD

RECEIPTS

Initial Advance 94,800,000 94,800,000Replenishment 14,585,279 14,585,279

TOTAL RECEIPTS 109,385,279 109,385,279

PAYMENTS

Disbursement Category:

Goods, Works, Non Consulting Services, Consultants Services,Training and Incremental Operating Costs incurred by MRRD UnderParts 2,3 and 4 16,938,080 16,938,080Rural Area Services standard Grants 35,839,814 35,839,814Goods, Works, Non-Consulting Services, Consultants Services,Training and Incremental Operating Costs incurred by IDLG UnderParts 2, 3 and 4 11,839,410 11,839,410Bank Charges 125 125

TOTAL PAYMENTS 64,617,429 64,617,429

Increase/(Decrease) in Cash & Cash Equivalents 44,767,850 44,767,850

Cash and Cash Equivalents at the beginning of the year -

Increase/(Decrease) in Cash & Cash Equivalents 44,767,850

Cash & Cash Equivalents at the end of the year 44,767,850

The accompanying notes form an integral part of this financial statement.

Khalid PayendaDeputy Minister for FinanceMinistry of Finance, Islamic Republic of Afghanistan , *,

Dated: November 27, 2018

Citizens' Charter Afghanistan ProjectWorld Bank Reference: Project ID PI60567; Grant ID D1390, D2130, A3827

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

1) LEGAL STATUS AND ACTIVITY

a) The Citizens' Charter Afghanistan Project has been setup to improve the delivery of coreinfrastructure and social services to participating communities through strengthenedCommunity Development Councils (CDCs). These services are part of a minimum servicestandards package that the Government is committed to delivering to the citizens ofAfghanistan. Citizens' Charter Afghanistan Project seeks to address key limitations of lineagency efforts and respond to financial constraints to national development investments.

b) The project is financed the following grants:

i) Two grants from International Development Association bearing number D1390 andD2130 in the amount of SDR 71,800,000 and SDR 93,200,000 respectively,

ii) One grant from the Trust Fund grant bearing reference number A3827 in the amount ofUSD 244,300,000,

c) The project consists of the following Parts:i) Service Standards Grantsii) Institution Buildingiii) Monitoring and Knowledge Learningiv) Project Implementation and 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 Agreements 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 I PSAS - 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) ReceiptsThese represent grants and aid received during the period and the amount of taxes collectedbut not transferred until the end of the financial year.

Citizens' Charter Afghanistan ProjectWorld Bank Reference: Project ID P160567; Grant ID D1390, D2130, A3827

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) Comparison of Budget and Actual AmountsThe Project, being the reporting entity for the purpose of these financial statements, in itscapacity as such does not make its annual approved budget publicly available nor is itsbudget explicitly available publicly in the compiled approved budget in a manner purposeful tothe context of these financial statements. Thus, the requirement of presenting a comparisonof budget and actual amounts is not considered contextually applicable,

e) 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.

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

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

Citizens' Charter Afghanistan ProjectWorld Bank Reference: Project ID P160567; Grant ID D1390, D2130, A3827

APPENDIX Al

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

Description Application Number Initial Advance Amount

USD USDTF A3827

DA-B 6 40,000,000DA-C 5 8,471,764DA-C 2 6,113,515DA-B 1 39,800,000

D1390:

DA-A 1 15,000,000

- ----- -----

Citizens' Charter Afghanistan ProjectWorld Bank Reference: Project ID P160567; Grant ID D1390, D2130, A3827

APPENDIX A2

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

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

USD USD USD

Alc 27624 Alc 27610 Alc 27611

Opening Balance as per Bank Statement -

Add:Receipts from Donor 15,000,000 79,800,000 14,585,279

Total Additions 15,000,000 79,800,000 14,585,279

Deduct:Payment for Project Expenditure - 52,774,938 11 842,366Bank Charges 25 50 50

Total Deductions 25 52,774,988 11,842,416

Closing Balance as per B.S 30 QAWS 1396 (21 DECEMBER 2017) 14,999,975 27,025,012 2,742,863

Citizens' Charter Afghanistan ProjectWorld Bank Reference: Project ID P160567; Grant ID D1390, D2130, A3827

APPENDIX A3US Dollar SPECIAL ACCOUNT 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 27624 14,999,975- A/c 27610 27,025,012- Ac 27611 2,742,863 44,767,850

Closing balance as per financial statements - 30 QAWS 1396 (21 DECEMBER 2017) 44,767,850

Citizens' Charter Af2hanistan ProjectWorld Bank Reference: Project ID P160567; Grant ID D1390, D2130, A3827

APPENDIX A4

STATEMENT OF ESTIMATED GRANT AMOUNTFOR THE YEAR ENDED 30 QAWS 1396 (21 DECEMBER 2017)

(Memorandum Statement - not an integral part of the Pinancia, Statements)

AmountD1390 D2130 A3827 Total

In currency of commitmentAmount of Grant XDR 71,800,000 XDR 93,200,000 USD 244,300,000Amount disbursed by VVorld Bank untill the end of 1396 XDR 10,612,782 XDR - USD 94,385,279Cancelled Amount XDR - XDR - USD -Undisbursed Balance XDR 61,187,218 XDR 93,200,000 USD 149,914,721

In reporting currencyAmount disbursed by World Bank untill the end of 13962 USD 15,000,000 USD - USD 94,385,279 USD 109,385,279Pquivalent US Dollars for undisbursed amount3 USD 86,885,850 USD 132.344,000 USD 149 914,721 USD 369 144,571

Total estimated amount of Grant Funds available USC 101,885,850 USD 132,344,000 USD 244,300,000 USD 478,529,8560

Cumulative Payments for Expenditures as per the Statement of Cash Receipts & Payments USD 64,617,429

1. Actual amounts of total disbursement made by the World Bank since the beginning of the project as available from Client Connection in XDRs.

2 Actual amounts of total disbursement made by the World Bank since the beginning of the project as available from Client Connection in USD Dollars

3. 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 of commitment) hasbeen 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 the financial year.

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