Ilubei Provincial Audit Office of the People's Republic of China

Audit Reportif? 4 [2017] 55 -

HB AUDIT REPORT C2017) NO.55

Project Name: Hubei Jingzhou Historic Town Conservation Project

Financed by the World Bank

Ak #: 8574-CN

Loan No.: 8574-CN

Project Entity : Project Management Office under the Project Leading

Group for the World Bank Financed Project in Jingzhou

2016

Accounting Period: 2016

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Contents

I. Auditor's Opinion ........................................... 3

..................................................................... 5

II. Financial Statements and Notes to the Financial Statements ..... ..... 5

. ......................................... 5

i. Balance Sheet ............ . .................... ...... 5

............................................................. 7

ii. Summary of Sources and Uses of Funds by Project Component........7

( 1p) 4 ifI ; ............................................... 9

iii. Statement of Implementation of Loan Agreement. ............... 9

( ) P . ............................... ....... 11

iv. Designated Account Statement............................ 11

(3w) k- # RA...................................................... 13

v. Notes to the Financial Statements .................... ...... 16

III...uditFindingi.......................19

111. Audit Findings and Recommendations ....................................... 20

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. Auditor's Opinion

Auditor's Opinion

To Project Management Office under the Project Leading Group for the

World Bank Financed Project in Jingzhou (PMO)

We have audited the special purpose financial statements (from page 5 topage 18) of Hubei Jingzhou Historic Town Conservation project financed

by the World Bank, which comprise the Balance Sheet as of December 31,2016, the Summary of Sources and Uses of Funds by Project Component,the Statement of Implementation of Loan Agreement and the Special

Account Statement for the year then ended, and Notes to the Financial

Statements.

Project Entity's and Hubei Provincial Finance Bureau'sResponsibility for the Financial Statements

The preparation of the Balance Sheet, the Summary of Sources and Usesot Funds by Project Component and the Statement of Implementation of

Loan Agreement is the responsibility of your entity, while the preparationof the Designated Account Statement is the responsibility of HubeiProvincial Finance Bureau, which includes:

i. Preparing and fair presenting the accompanying financial statements in

accordance with China's accounting standards, accounting system, and

the requirements of the Loan Agreement of the project;

ii. Designing, implementing and maintaining necessary internal control to

ensure that the financial statements are free from material misstatement,whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these financial statements

based on our audit. We conducted our audit in accordance with the

Government Auditing Standards of the People's Republic of China andInternational Standards on Auditing. Those standards require that we

comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the financial statements are free from

material misstatement.

An audit involves performing proccdures to obtain audit evidence aboutthe amounts and disclosures in the financial statements. The procedures

3

selected depend on the auditor's judgment, including the assessment of therisks of material misstatement of the financial statements, whether due tofraud or error. In making those risk assessments, the auditor considersinternal control relevant to the entities' preparation and fair presentation ofthe financial statements in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the entity's internal control. An audit alsoincludes evaluating the appropriateness of accounting policies used andthe reasonableness of accounting estimates made by management, as wellas evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is appropriate andsufficient to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements identified in the first paragraphpresent fairly, in all material respects, financial position of Hubei JingzhouHistoric Town Conservation Project financed by the World Bank as ofDecember 31, 2016, its financial receipts and disbursements, the projectimplementation and the receipts and disbursements of the designatedaccount for the year then ended in accordance with China's accountingstandards and system, and the requirements of the project LoanAgreement.

Other Matters

We do not comment on this item because no loan withdrawal applicationfor this project was submitted during this period.

The audit report consists of the Auditor's Opinion and two more partshereinafter: Financial Statements and Notes to the Financial Statements,Audit Findings and Recommendations.

Hubei Provincial Audit OfficeJune 30, 2017

Address: No.3 Tian'e Road, Wuchang District, Wuhan, Hubei, PRC.Postcode: 430071Tel.: 86-027-87236025Fax: 86-027-87252502

The English translation is for the convenience of report users; Please takethe Chinese audit report as the only official version.

4

I. Financial Statements and Notes to the Financial Statements

i. Balance Sheet

BALANCE SHEET2016 I 12 ,] 31 N

(As of December 31, 2016)

Project Name: Hubei Jingzhou Historic Town Conservation Project Financed by the World Bank

Prepared by: Project Management Office under the Project Leading Group for the WorldBank Financed Project in Jingzhou Currency Unit: RMB Yuan

pplanNon of Fund Lme Beginning Balance Ending Balance Sources of Fund ne Beginning Balance Ending Balance

Tzt Flo:-t Expenditures 1 0.00 14 139,487.65 Total Project 28 0.00 93,850,000.00Appropriation Funds

Fsxed Assets Transferred 2 Project Capital and Capital 29Surplus

Costiruction Expenditures to 3 - - cli:G 30Including: Grants 3.De D-sposed

bestments Transferred-out 4 -Total Project Loan 31 0.00 1,734,250.00

1. ttIRWA

Construcuon in Progress 5 0.00 14,139,48765 Total Project Investment 32 000 1,734,750.00Loan

Loan Receivable F Foreign Loan 33 0.00 1,734,250.00

IHdBn 7 -- 34breestnent7 Loan Receivable Including: IDA

AW e on of Investment 8 -- 35 0.00 1,734,250.00Las___IBRD

dmAoppopriationof 9 -- Technical 36B oink Inies ne Loan cooperation

10 37!ne0: Co- Financing

n qtepment Losses in I - (2) 38Domestic Loan

12 0.00 81,839,855.72 2. Othr La --Tc- Cash' and Bank Other Loan

13 0.00 81,836,794.72 Appropriation of 40 -

Investment Loan

14 Including World Dank 41 -________ _____ _ Loan

15 0.00 3,061.00 42 -Cash a HandBond Fund

Tobe continued)

5

Receivable 16 0.00 5,000.00 Construction Expenditures 43to be Offset

on; Bnk ILoan 17 -- 44\eab,le Total Payablc

C 3w Fee 18 - Including: World Bank 45 -

Loan Interest Payable

Wrld Bank Loan Service- 19 - World Bank Loan 46Commitment FeePayable

20 - -I47 --M eurris World Bank LoanService Fee Payable

21 0.00 48,077.80 48Taij F d Asets Other Payables

22 0.00 70,240.00 49 -22u.0 0n0,4000Appropriation of Fund

L cumulated 23 0.00 22,162.20 Rå E ig 50 0.00 448.171.17Retamned Eammngs

24 0.00 48.077.80

25: Asses Pending Disposal

F : Assas Losses in 26

27 0.00 96,032,421.17 T o f51 0.00 96,032,421.17TaAppcation of Fund Total Sourcs of Fund421

( n1. Sfi. Summary of Sources and Uses of Funds by Project Coppo oent

Summary of Sources and Uses of Funds by Project Component IAM 2016 $ 12 ) 31 U

(For the period ended December 31, 2016)

7oiect Name: Hubei Jingzhou Historic Town Conservation Project Financed by the World Bank

t,f-f flXAJiý ýt -ý4)f k, -f : A Fepared by: Project Management Office under the Project Leading Group for the World

Bank Financed Project in Jingzhou Currency Unit: RMB Yuan*43 I†

Current Period Cumulative

Curremt3i 31 lj U'i- 1,i I M91 with98 _ý i fCurrent Period Current Period Uumulaive

Period % Life of PAD Cumulative ActualBudget Actual % Completed

Compleied

95,584,250 00 96,032,421.17 100.47% 1,048,654,100.00 96,032,421 17 9.16%T ' orcs of Funds

inaracing-

1,734,250.00 1,734,250,00 100.00% 615,000,000.00 1,734,250.00 0.29.

- -4 Counterpart 93,850,000.00 94,298,171.17 100.48% 433,654,100.00 94,298,171.17 21.74%

ý_ -. 'n TotalAppbcanon of Funds(ä2 14,139,47.65 14,139,48765 100.00% 1,048,654,100.00 14,139,487.65 1.35%

H Cuhural Heritage 348,872,300.00Cos nnand Tourism

semces Improvement

EœIogical and Water - 283,822,200.00&v.r,nmie nt Improvemnent

-l..- 100,566,300.00TnsotImprovemnent

Management and 31,697,500.00insuuional Capacityinprovement

Interest- 33,143,400.00

ront end fee 1,734,250.00 1,734,250.00 100.00% 1,537,500.00 1,734,250.00 112.80%

K w thers 12,405,237.65 12,405,237.65 100.00% 249,014,900.00 12,405,237.65 4.98%

DiTerence 81,892,933.52 81,892,933.52

Change in 5,000.00 5,000.00

2 e L C n0.00 0.00

3 % M&_ cb m 81,839,855.72 81,839,855.72Cast andý Bank

4 t Ocbe- 48,077.80 48,077.80

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iv. Designated Account Statement

Designated Account Statement

*,M;k _ F 2016 * 12 ] 31 H

(For the period ended December 31, 2016)

A A L #d M t #4 Y -X - P e if, J )TPqfft#:Project Name: Hubei Jingzhou Historic Town Conservation Depository Bank: CHINA CONSTRUCTION BAWHubei Provincial Branch Project financed by the World Bank

8574-CN 42050186860800000684Loan No. 8S74-CN Account No. : 42050186860800000684

rP f 4: 75Prepared by: Hubei Provincial Finance Bureau Currency: USD

AMf :Part A-AccountActivity for the Current Period Amount

Beginning Balance

If bo: -Add:

Total Amount Deposited this Period by World Bank

Total Interest Eamud this Period if Deposited in Special Account

Total Amount Refunded this Period to Cover Ineligible Expenditures

Deduct:

Total Amount Withdrawn this Period?A tj 4Y3 A 11151 It, rn J! K 9 V 3_P IT,

Total Service Charges this Period if not Included in Above Amount"ohdritwn

E dffip, Balancebe continued)

Part B-Account Reconciliation Amount

Aimount Advacd by World Bank

Deduct:

2 ttlif~ll4&uEi

Total Amount Recovered by World Bank

Outstanding Amount Advanced to the Special Account at the End of

this Period

Ending Balance of Special Account

Add:

Amount Claimed but not yet Credited at the End of this Period

Application No. Amount

Amount Withdrawn but not yet Claimed at the End of this Period

7. J d (17 5 1i6 4 )Cumulative Service Charges (If not Included in Item 5 or 6)

Deduct:

8 1'.ARA (WA At EW )Interest Earned (If Included in Special Account)

Total Advance to the Special Account Accounted for at the End of this

Period

12

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3. 4 1 Wo 2016 Ä12») 31 s UP uSD1-A4 6. 9370 Jt.

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42050186860800000684,

15

v. Notes to the Financial Statements

Notes to the Financial Statements

1.Project Overview

The Loan No. of Hubei Jingzhou Historic Town Conservation Project is8574-CN. It aims to help the Jingzhou protect its cultural heritage,promote its tourism development, improve the living conditions of the

people around Jingzhou Historic Town. Taking the cultural heritageconservation and utilization as the core, the Project is composed of thefollowing four parts: Cultural Heritage Conservation and TourismServices Improvement; Water Environment Improvement; TransportImprovement; Project Management and Institutional CapacityImprovement. The Project was started planning in November, 2013. TheProject Agreement was signed on April 26, 2016 and came into effect onJuly 25, 2016. The account of the project is expected to be closed beforeJune 30, 2021. The total investment of the project was planned aroundRMB1,048,654,100 yuan, among which the total World Bank loanamount was USD100,000,000, equivalent to RMB615,000,000 yuan.

2. Scope of the Financial StatementsConsolidation scope of the financial statements covers the financialstatements of the Project Management Office under the Project LeadingGroup for the World Bank Financed Project in Jingzhou and the

Designated Account statements of the Provincial Finance Bureau.

3. Accounting Policies

3.1 The Financial Statements of the project were prepared in accordancewith the requirements of Accounting Methods for the World BankFinanced Project issued by the Ministry of Finance(Caijizi[2000]No.13 )

3.2 In accounting practice, the Gregorian calendar year is adopted as thefiscal year from January 1 to December 31.

3.3 The accrual basis and the debit/credit double entry bookkeepingmethod are adopted. RMB is used as the recording currency ofbookkeeping.

3.4 The exchange rate adopted in the financial statements was theexchange rate on December 31, 2016 of the People's Bank of China,which is USD1= RMB6.9370 yuan.

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4. Explanation of Subjects

4.1 Total Project expenditures

By the end of 2016, the cumulative expenditures wereRMB14,139,487.65 yuan, which accounted for 1.35% of the total

investment plan.

4.2 Cash and Bank

On December 31, 2016, the balance was RMB81,839,855.72 yuan, withdeposit RMB81,836,794.72 yuan and cash RMB3,061 yuan.

4.3 Prepaid and Receivable

On December 31, 2016, the balance was RMB5,000 yuan in the form of

PMO staff's personal borrowing.

4.4 Fixed Assets

On December 31, 2016, the balance was RMB48,077.80 yuan, which

are mainly some computers, air conditioners and office furniture, etc.purchased by PMO.

4.5 Project Appropriation Funds

The balance on December 31, 2016 was RMB93,850,000 yuan, whichwas the counterpart funds allocated by Jingzhou Municipal Finance

Bureau.

The total planned counterpart funds for this project were

RMB433,654,100 yuan. By the end of 2016, RMB93,850,000 yuan of

the counterpart funds had been allocated, which accounted for 21.64%

of the plan. The total planned counterpart funds of the municipal level

were RMB433,654,100 yuan and the actual cumulative allocated funds

were RMB93,850,000 yuan, accounting for 21.64% of the plan.

4.6 Project LoanThe balance on December 31, 2016 was RMB1,734,250yuan, which is the Front-End fee of US$250,000 paid to the World Bank

in 2016.

4.7 Payable

The balance on December 31, 2016 was RMB0 yuan. All the payablehas been paid off.

4.8 Retained Earnings

The balance on December 31, 2016 was RMB448,171.17 yuan, which isthe bid security 400,000 yuan that Iliger Bus Company Limited (HIGER)forfeited due to its abandon of its bidding on the hybrid buses in

17

accordance with relevant regulations and bank deposit interest income48,171.17 yuan.

5. Special Account

The Special Account of this project is set in Hubei Provincial Branch of

CCB, with the account number of 42050186860800000684, and USD ascurrency Unit. In 2016, the Special Account has not been used.

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