C 43, PAMPOSH ENCLAVE S. N. NANDA & CO. GREATER KAILASH - I NEW DELHI - I IO 048 CHARTERED ACCOUNTANTS E-mail : snnco@snnco.net PH: 91-11 -26227853, 41731475 : info@snnco.net FAX: 91 -11 -26227853 INDEPENDENT AUDITOR'S REPORT The Chief Financial Officer, National Housing Bank, Core-SA, India Habitat Centre, Lodhi Road, New Delhi - 110003 Report on the Project Financial Statements We have audited the accompanying financial statements of the National Housing Bank - Low Income Housing Finance Project financed under Credit No. 5283-IN, which comprise the statement of Sources and Application of Funds and the Reconciliation of Claims to Total Applications of Funds for the period ended 30.06.2018 (01.07.2017 to 30.06.2018). These statements are the responsibility of the Project's Management. Our responsibility is to express an opinion on the accompanying financial Statements based on our audit. We conducted our audit in accordance with the Auditing Standards promulgated by the Institute of Chartered Accountants of India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. Our Audit examines, on a test basis, evidence supporting the amounts and disclosures in the financial statements. It also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements present fairly, in all material respects, the sources and application of funds of National Housing Bank - Low Income Housing Finance Project for the period ended 30.06.2018 (01.07.2017 to 30.06.2018) in accordance with Institute of Chartered Accountants of India Accounting Standards. In addition, as shown by records provided to us, and to the best of our information and according to the explanations given to us: a) With respect of Internal Unaudited Financial Report, adequate supporting documentation has been maintained to support claims to the Government of India for the reimbursements of expenditure incurred; b) We have verified the Statement of Sources and Application of Funds as well as the Statement of Reconciliation of Claims to Total Application of Funds. c) Expenditures (including sub Loans to PLis) shown in the PFS are eligible for ~~...._ financing under the legal agreements, are recorded in the books of account of cf HB and no other sources of funds have been received by NHB for these O penditures; d) The bank funds claimed during the reported period shown in the Project Financial Statements are eligible under the agreements. However, part amount received by NHB from Government of India. The same are recorded in the books of accounts as assets & liability. Further necessary disclosures have also been made in the notes to accounts. e) The accounting, and internal control systems underlying the project, including material compliance with the Project Operational Manual, and oversight over the Project funds were adequate and maintained throughout the audit period; f) Project funds have been provided to PLis that meet the eligibility criteria given in the Project Operational Manual and that the aggregate of the housing loans made to beneficiaries under each category (quadrant) is within the individual limits set forth in the Project Operational Manual; g) Contracts for consultancy services have been provided as per the agreed procedures. During the FY 2017-18, no Contract has been given. For S.N. Nanda & Co. Chartered Accountants FRN: 000685N fl" ~'-tQ,~t t!(_,f S. N. Nanda Partner Partner M. No. 005909 Date: September 04, 2018 Place New Delhi C 43, PAMPOSH ENCLAVE S. N. NANDA & CO. GREATER KAI LASH - I NEW DELHI - 110 048 CHARTERED ACCOUNTANTS E-mail : snnco({i),snnco.net PH: 91-11-26227853, 41731475 : info@snnco.net FAX: 91-11-26227853 Management Letter The Chief Financial Officer, National Housing Bank, Core-SA, India Habitat Centre, Lodhi Road, New Delhi - 110003 Respected Sir, This management letter is provided in connection with your audit of the Project Financial Statements of the Low Income Housing Finance Project under Credit No. 5283- IN (the Project) for the year ended on 30.06.2018 (01 .07.2017 to 30.06.2018) for the purpose of expressing an opinion on the findings of the audit and recommendations for improvement in Internal Control and other matters corning to attention of the auditor during the audit. Our audit plan was prepared using a risk-based methodology that includes an assessment of the systems, records & control of the Bank. The following methodology was adopted for the purpose of our review: • Review of the agreements entered by the ID A, Government of India & National Housing Bank provided to us. • Verification of the quarterly Internal Unaudited Financial Report along with the refinance disbursement sheet provided by the PU to the concerned Department. • Selection of sample cases of disbursements, in order to ensure effectiveness of disbursement methodology to achieve the end objective of the Project. • Verification of compliance of the project with the Operational Manual, identification of key risk/ weaknesses, methods for mitigation of these key risks/ weaknesses. • The bank funds claimed during the reported period shown in the Project Financial Statements are eligible under the agreements; however part amount received by NHB from the Government of India. For S.N. Nanda & Co. Chartered Accountants FRN: 000685Nf _ . --- ~~...M?' S. N. Nanda Partner M. No. 005909 Date : September 04, 2018 Place New Delhi •, NATIONAL HOUSING BANK India: Low Income Housing Finance Project (Credit No. 5283-IN) Statement of Reconciliation of Claims to Total Applications of Funds Reportf or the year en de d 30 06 2018 (In~) Particulars Schedules Current Year 2017-18 2016-17 2015-16 2014-15 2013-14 2012-13 Project to date (July to June) (July to June) (July to June) (July to June) (July to June) (July to June) Bank Funds claimed during the I 685,578,165 2,979,711,258 1,483,816,674 155,343,443 491,658,453 0 5,796,107,993 reporting period ( A ) Total Expenditure made during 832,999,895 1,720,407,873 2,663,530,557 209,289,829 184,821,962 302,325,096 5,913,375,212 the year ( B) Less: Ineligible expenditures 0 0 0 0 0 0 0 (C) Expenditures not claimed ( D ) 0 0 0 0 184,821,962 0 0 Shortfall Amount received due to Forex Fluctuation and 0 0 0 0 18,896,635 0 18,896,635 Capping on Quadrant 1 Expenditure incurred under 13,613,515 Component I & III, but not 1,399,895 2,607,873 5,430,557 4,175,190 0 0 claimed** Expenditure incurred during 0 0 the year but not claimed till 0 0 165,925,327 0 0 year end Total Eligible Expenditures Claimed by NHB (E)=(B) 831,600,000 1,717,800,000 2,658,100,000 205,114,639 302,325,096 0 5,880,865,062 -(C)-(D) World Bank Share @ 100% of II 831,600,000 1,717,800,000 2,658,100,000 205,114,639 302,325,096 0 5,880,865,062 (E) above = ( F ) (A) - ( F )* -146,021,835 1,261,911,258 -1,174,283,326 -49,771,196 189,333,357 -84,757,069 For S.N. Nanda & Co. '{ ~~~~ an Chartered Account~ FRN: 000685N Deputy General Manage~HB Deputy General Manager NHB r-----..::s---=;~ \,,.-'],. <:::::. - - - v \YI-.!(_ . S. N.Nanda Partner M. No. 005909 component W"!Se Expenses are given as und er: Claim in INR submitted under Claim in INR submitted Claim in INR submitted Particulars Component I under Component II under Component III Expenses Nil 5,880,865,062 13,613,515# #Expenditure incurred under Component III are not being claimed from World Bank. The figures are shown only for information. NHB Deputy General Manager NHB For S.N. Nanda & Co. Chartered Accountants FRN: 000685N S. N. Nanda Partner M. No. 005909 Dated: September 04, 2018 Schedule I Bank Funds claimed during the reporting period (ss on June 30, 2018) Date of Receipt by Exch Rate Exch Rate SDR USD INR Govt. of (SDR-USD) (USD-INR) India 22-Aug-17 6,314,587.92 1.40870 8,895,360 64.0748 569,968,413 23-Mar-18 1,219,757.56 1.45438 1,773,991 65.1693 115,609,752 TOTAL 7,534,345.48 10,669,351 685,578,165 Schedule II Details of IUFR - Quarter Wise July-June July-June July-June July-June July-June Period 2013-14 2014-15 2015-16 2016-17 2017-18 Cumulative ended 31.12.13 302,325,096 - - - 302,325,096 31.03.14 147,499,408 - - - 449,824,504 30.06.14 18,425,919 - - - 468,250,423 30.09.14 - 1,915,017 - - 470,165,440 31.12.14 - 55,591,133 - - 525,756,573 31.03.15 - 144,506,766 - - 670,263,339 30.06.15 - 3,101,723 - - 673,365,062 30.09.15 - - 220,000,000 - 893,365,062 31.12.15 - - 188,400,000 - 1,081,765,062 31.03.16 - - 1,934,800,000 - 3,016,565,062 30.06.16 - - 314,900,000 - 3,331,465,062 30.09.16 - - - 90,000,000 3,421,465,062 31.12.16 - - - 40,000,000 3,461,465,062 31.03.17 - - - 1,020,000,000 4,481,465,062 30.06.17 - - - 567,800,000 5,049,265,062 30.09.17 - - - - - 5,049,265,062 31.12.17 - - - - 495,300,000 5,544,565,062 31.03.18 - - - - 139,700,000 5,684,265,062 30.06.18 - - - - 196,600,000 5,880,865,062 Total 468,250,423 205,114,639 2,658,100,000 1,717,800,000 831,600,000 Deputy General Manager NHB Deputy General Manager NHB For S.N. Nanda & Co. Chartered Accountants FRN: 000685N S. N. Nanda Partner M. No. 005909 Dated: September 04, 2018 Annexure 1 Name of the Project India: Low Income Housing Finance Project Loan/Credit/Grant No.: Credit No. 5283-IN Statement of Sources and Applications of Funds Report for the year ended June 30, 2018 (In~) Current Year Project to Particulars 2016-17 2015-16 2014-15 2013-14 2012-13 2017-18 date Opening Balance, (if cash balances are controlled by the entity) (A) - - - - - - - Receipts National Housing Bank* -667,000,105 -38,214,136 763,288,891 209,289,829 165,925,327 302,325,096 735,614,902 Funds received from Government through Budget (These will include external assistance received by Government 1,500,000,000 1,758,763,675 1,900,000,000 Nil Nil Nil 5,158,763,675 for the project.) Funds received directly by Project Implementing Au thority Nil Nil Nil Nil Nil Nil Nil through external assistance Beneficiary Contribution (if any) Nil Nil Nil Nil Nil Nil Nil Total Receipts (B) 832,999,895 1,720,549,539 2,663,288,891 209,289,829 165,925,327 302,325,096 5,894,378,577 Total Sources (C = A+B) 832,999,895 1,720,549,539 2,663,288,891 209,289,829 165,925,327 302,325,096 5,894,378,577 Expenditures by Component Component - I Nil Nil Nil Nil Nil Nil Nil Component - II 831,600,000 1,717,800,000 2,658,100,000 205,114,639 165,925,327 302,325,096 5,880,865,062 Component - III ** # 1,399,895 2,749,539 5,188,891 4,175,190 - - 13,513,515 Total Expenditures (D) 832,999,895 1,720,549,539 2,663,288,891 209,289,829 165,925,327 302,325,096 5,894,378,577 Closing Balance, (if cash balances are controlled by the entity) (C-D) - - - - - - - *Amount includes expenditure incurred under Component I & III **Expenditure incurred under Component III are not being claimed from World Bank. The figures are shown only for information. #excluding provisioning of Rs. 100,000/- provided during June 2018 under Component III For S. N. Nanda & Co. ~ Chartered Accountants FRN: 000685N Deputy General Manager NHB S. N. Nanda Partner M. No. 005909 Interim Unaudited Financial Report IFR 1 LOW INCOME HOUSING FINANCE PROJECT Credit No. 5283-IN Implementing Agency - National Housing Bank Sources and Uses of Funds for the quarter ended 30.06.2018 In INR Amount Sr.No. Item Current Quarter {CQ) Year to Date {YTD) Cummulative to Date Apr 18 - Jun 2018 July 17 - June 18 {CTD) 1 2 3 4 5 A SOURCES OF FUNDS i) IDA 196,600,000 831,600,000 5,880,865,062 ii) NHB - Tata/ Sources a/ Funds (A) 196,600,000 831,600,000 5,880,865,062 B USES OF FUNDS Bl EXPENDITURE BY COMPONENTS I Capacity Building of NHB and Primary Lenders - II Financing Support for Sustainable and Affordable Housing i) Secured Sub Financing to Formal Primary Borrowers - - 302,325,096 ii) Secured Sub Financing to Informal Primary Borrowers - 3, 180, 739,966 Loan secured alternatively, Sub Financing to Formal Primary Borrowers iii) (including Pilots) - Loan sercured alternatively, Sub Financiang to Informal Primary iv) Borrowers (including Pilots) 196,600,000 831,600,000 2,397,800,000 Sub Tata/ Component II 196,600,000 831,600,000 5,880,865,062 Ill Project Implementation* 474,895 1,399,895 13,613,515 Total Expenditure by Components {Bl=l+ll+lll)) 197,074,895 832,999,895 5,894,478,577 B2 Pre Financing/Prospective Disbursements (NHB) Total Uses of Funds (Bl+ B2) 197,074,895 832,999,895 5,894,478,577 Deputy General Manager - PIU Deputy General Manager - PIU Date: September 04, 2018 ates l. IFRs will be prepared on cash basis. 2. The figures shou ld be taken from the account codes allocated to the Project. 3. Details of Qualified Plls and housing Joans to primary borrowers will be provided in the Annex to IFR 2. 4. Total Expenditure by Components should match with the details in IFR 2 • Expenditure incurred under Component Ill are not being claimed from World Bank. The figures are shown only for information. Interim Unaudited Financial ReRort IFR2 LOW INCOME HOUSING FINANCE PROJECT Credit No. S283-IN Implementing Agency - National Housing Bank Project Expenditure by Component/Sub Component during the quarter ended 30.06.2018 (Amt. in INR) Current Quarter {CQ) Year to Date (YTD) Total Cumulative to Project Expenditure Provision as per PAD Apr 18 - Jun 2018 July 17 - June 18 date (CTD) I Capacity Building of NHB and Primary Lenders b. Consultant's Services -- Financial Literacy Module -- Market Infrastructure (credit bureau for informal borrowers) -- Pilot on underwriting unsecured lending with alternate collateral Add as required Sub Total Component I 0 0 0 II Financing Support for Sustainable and Affordable Housing Formal Dwelling- Formal Sector Income Quadrant (I) 5% of the credit 0 0 3D2,325,D96 Formal Dwelling- Informal Sector Income Quadrant (II) 50% of the credit 0 0 3,180,739,966 Loan secured alternatively, Sub Financing t o Formal Primary Borrowers (Ill) 20% of the credit 0 0 0 Loan sercured alternatively, Sub Financiang to Informal Primary Borrowers (including Pilots) (IV) 25% of the credit 196,600,000 831,600,000 2,397,800,000 Sub Total Component II as above 196,600,000 831,600,000 5,880,865,062 Ill Project Implementation• a. Goods (Office Equipment, Computer, Software etc) b. Consultant's Services 474,895 1,374,895 13,507,322 -- Procurement Expert 0 0 1,750,000 -- Environment Expert 474,895 1,374,895 4,595,619 -- Social Expert 0 0 3,765,703 -- UHF Expert 0 0 3,396,000 -- Impact Evaluation Add as required c. Incremental Operating Costs 0 25,000 106,193 -- Salari es of Contractual Staff -- Salaries of NHB Staff assigned to PIU - Office Expenses, Maintenance, Rent, etc -- 0 & M and hiring of vehicles, equipment and goods --Audit Fee 25,000 100,000 -- Travel --Others 0 0 6,193 Sub Total Component ffl 474,895 1,399,895 13,613,515 Total Expenditure (1+11+111)) as above 197,074,895 832,999,895 5,894,478,577 • Expen~ur~ ~~~ Ill are not being claimed from World Bank. The figures are shown only ~ ~~NO~ - ~ ~~ Deputy General Manager - PIU Deputy General Manager - PIU Date: September 04, 2018 D Notes The sub totals and total should match with the corresponding items in IFR 1 *. '"'t"/i. .* ~ Interim Unaudited Financial Report IFR 3 LOW INCOME HOUSING FINANCE PROJECT Credit No. 5283-IN Implementing Agency - National Housing Bank Forecash of Cash requirements for next 2 quarters l!N INDIAN RUPEES (million) IN USO EQUIVALENT Cash requirement for next Cash Tota l cash !DA Eligible cash Total cash IDA Eligible cash 1st quarter(*) requirement requirement for requirement for the requirement for requirement for Expenditure ELIGIBLE% for next 2nd the next 2 next two quarters the next 2 the next 2 quarters quarter quarters quarters 1 2 I Capacity Building of NHB and Primary Lenders I I b. Consultant's Services -- Financial Literacy Module -- Market Infrastructure (credit bureau for informal borrowers) -- Pilot on underwriting unsecured lending with alternate collateral Add as required Sub Total Component I II Financing Support for Sustainable and Affordable Housing 100% 391.00 - 391.00 Sub Total Component II Ill Project Implementation a. Goods (Office Equipment, Computer, Software etc) b. Consultant's Services -- Monitoring & Evaluation -- Impact Evalu ation Add as required c. Incremental Operating Costs -- Salaries of Contractual Staff -- Salaries of NHB Staff assigned to PIU -- Office Expenses, Maintenance, Rent, etc -- 0 & Mand hiring of vehicles, equipment and goods -- Travel -- Others Sub Total Component Ill Total projected Expenditure (1+11+111)) 391.00 0.00 391.00 Deputy General Manager - PIU Deputy General Manager - PIU Date: September 04, 2018 Interim Unaudited Financial Report Annex to IFR 2 LOW INCOME HOUSING FINANCE PROJECT Credit No. 5283-IN Implementing Agency· National Housing Bank Report for the quarter ended 30.06.2018 Part A: Financial Support for Sustainable and Affordable Housing to Qualified Primary lending Institutions {PU}· segregated by each line item mentioned under Bl.II of IUFRl INR lending by Qualified PUs to Primary Borrowers (cumulative out of column 10) Di sbursements to Qualified PUs by NHB Secured Sub-Financings Unsecured Sub-Financings Nature of PU Date of Na me of the Amount Sanctioned Disbursement to Rate of Tenure S.No (HFC/bank/MFl/o Disbursement Qualified PU (INR) Plls by NHB Interest (Yrs) Pilots for thers) (dd/mm/ yyyy) Cumulative to Date Formal Primary Informal Primary Formal Primary Informal Primary Informa l Primary Current Quarter {CQ) Year to Da te (YTD) (CTO) Borrowers Borrowers Borrowers Borrowers Borrowers Apr 18 - Jun 2018 July 17 - June 18 10 11 12 13 14 15 Avaas HFC 29-Jun-18 113,244,500 100,000,000 7.35 15 100,000,000 457,200,000 2,167,953,675 694,553,675 1,473,400,000 Financers Ltd.* India Shelter Finance HFC 29-Jun-18 110,819,000 96,600,000 7.35 10 96,600,000 96,600,000 772,258,580 125,658,580 646,600,000 Corporation Limited Grand Total 224,063,500 196,600,000 196,600,000 553,800,000 2,940,212,255 820,212,255 2,120,000,000 • Formerly known as AU Housing Finacne limited Notes: 1. Total of columns 11to14 should match with amount in column 10. 2. Please provide sepaarte PU-wise detailed list of the primary borrowers (name, amount of loan, location etc.) under columns 10-13. Part B: Pre-Finance/Prospective Disbursement In INR O/s at the Amount Nature of PU beginning Disbursed Name of the (HFC/bank/MFl/o Date of of the during the Amount adjusted during O/s at the close of Amount included in Part S.No Qualified PU thers) Sanction Amount Sanctioned quarter quarter the quarter the quarter A above 10 (out of 8) Grand Total It is certified that the amount shown under Component II hove been made only to PL/s that have complied with them· um eligibility criteria as given in the Project Operations Manual and is the ~fy~~.~~~~ Date' Septemb., 04, 2018 Deputy General Manager • PIU Interim Unaudited Financial Report IFR 3 LOW INCOME HOUSING FINANCE PROJECT Credit No. 5283-IN Implementing Agency - National Housing Bank Schedule of Drawl from IDA for the quarter ended 30.06.2018 In INR Actual Eligible Expenditure Reimbursable from Year to Date Reimbursement Category World Bank for Current Quarter (CQ) (VTD) July Cummulative to %age Current Quarter Apr 18 - Jun 2018 17 - June 18 Date {CTD) 1 2 3 4 5 6 7=3*6 Goods, consultants' services, and Operating Costs 1 under Part A of th e Project Sub-Financings including pilot subfinancing under 2 Part B of the Project 196,600,000 831,600,000 5,880,865,062 100% 196,600,000 Goods, consultants' services, and Operating Costs 3 under Part C of the Project 0 0 0 0 Grand Total (1+2+3) 196,600,000 831,600,000 5,880,865,062 196,600,000 \J . \~"""""~ Deputy General Manager - PIU Deputy General Manager - PIU Date: September 04, 2018 Interim Unaudited Financial Report IFR4 LOW INCOME HOUSING FINANCE PROJECT In INR Sr.No. Contract no./ Description of Work WBR No. & Date of Supplier I Date of Contract Commence-ment Date of Amount paid - Current Amount paid - Amount paid - WB NOC Consultant Contract Amount (INR} Date Completion Quarter (CQ} Apr 18 - Year to Date Cumulative to Date Jun 18 (YTD) July 17 - (CTO) June 18 10 11 Cacacitv Build ine: (Comconent ll Contract No. Individual Contract 1 : Procurement Expert •• 26-Jun-14 1,500,000 26-Jun-14 25-Jun-17 1,750,000 01/2014 (NOC : Consultant: Mr. 17.06.20141 Ketan Mandani Contract No. 02/2014 (NOC Not 26-Nov-2014 30-Nov-16, 30- 12-Jan-14 and 27- ii) Contract 2 : Environm e nt Expert required as it Individual and 2,400,000 June-17 & 30- 4 74,895 1,374,895 4,595,619 Nov-16 comes under Post Consultant : Nov 27, 2016 Jun-18 Review! Mr.Rohit Sine:h Contract No . 03/2014 (NOC Not Individual 07-Jan-17 and iii) Contract 3 : Social Expert • required as it Consultant: 08-Jan-15 3,399,984 08-Jan-15 3,765,703 30-June-17 comes under Post Ms.Poonam Review) Mehta Contract No. 04/2014 (NOC Not Individual iv) Contract 4: l ow Incom e Housing Finance Expert# required as it Consultant: Mr. 05-Jan-15 7,200,000 OS-Jan-15 04-Jan-19 3,396,000 comes under Post Venkateshwarlu Review) Prerepa Proiect lmclementine: Unit {Component Ill) il Contra ct l ii) Contract 2 Grand Tota l (1+21 474,895 1,374,895 13,507,322 • •PE cont racted for 150 mandays overa pe ri od of 3 years. The Con t ract got t erminated duri ng Apr 15, since PE ha s com pleted 165 ma ndays. Subsequen tly, th e services of PE ava iled du ring Nov 2015 fo r fra ming RFP. •SE resigned fro m the services w.e .f. 02. 03.2017 #UHF contract was terminated w.e.f. 04.03.2016 Technical Review for Compone nt 11- Financial Support for Sustainable and Affordable Housing In INR Financial Support Date of sub mission to Date of No to Qualifi ed Sr.No. Name of Pll World Bank for Objection give n Primary Lending Technical Review by Worl d Bank Institutions Pilots for Informal Total Amount Formal Primary Formal Prima ry Informal Primary Informal Primary Dis bursed Borrowers Borrowers Borrowers Primary Borrowers Borrowers 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 . Grand Total Cumulative to Date ./' '\.) ~k~~M»--\ ~ Deputy General Manager - PIU Deputy General M anager - PIU Date: September 04, 2018 Notes: First Pro posals eq uivalent to $1 mn in each of the category mentioned in col 4 to 8 should be submitted to t he World Bank fo r technical review.