Financial Attest Audit Report on the Accounts of Disaster and Climate Resilience Improvement Project Implemented by Project Implementation Unit Provincial Disaster Management Authority, Punjab World Bank Loan: 5686-PK Financial Year 2017-18 Auditor General of Pakistan Islamabad Table of Contents A [BREVIA[IONS AND ACRONYMS ......... --. . --............... - -..... PREFA C E A..E. ........... - ..... .. - - ...... .--.......... ... ......-. 2 PA RT-I ~~~........... - - -. ~ . .- -. . - .. .-- -...... . -3 PROJECT OVERVIEW4... 4..... .. .-.......-.......-..... ..- 4 AUDITOR'S REPOR TTO THE MANNAAGGEEMNENT ...........-............ .. -5 FINANCIAL STATEM ENTS.... ..........-. .- - . ..6.......-..... ....~-- ....6 PA RT -H I... .- ... . .. . ................. .-. ... . . ... ....7 MANAGEMENT LETTER -...TE..R.0.. ............-. 20 EXECUTIVE SUMMA.RY, - .. . - -............ - --~ .....- .........- - - .. 21 1. INT RO D UCTIO N .... - . . . .......-........-...............- ..... .. 22 2. AUDiT OBJECTIVES......... . .- . . . ..2...... . . ..... ...... - - - ...... .22 3. AUDIT SCOPE AND METHODOLOGY .............O.O.Y.22............... .. -22 4. AUDIT FINDINGS AND RECOMMENDATIONS...T L.N........ ... 23 4.1 Financial Management ......--- -3.....-3... .- .... .. 23 4.2 Procurement and contract Managementan.a.g... 4. - ...... .... 24 4.3 Compliance with loan Covenant......... - --..9............ 29 4.4 Sustainability, . . ......-.............. ....-- .- - - 29 4.5 Overall Assesessmnent - --n.. ... .............--. .......... ....... 29 5. CONCLUSIONN........ . .1......... -. .. ,.......--3........ - 31 ACKNOWLEDGENM1ENT.. ...-........ ... - - .......-......- ...... - - . .. 3 ABBREVIATIONS AND ACRONYMS AGP Auditor General of Pakistan DAC Departmental Accounts Committee DGPR Director General Public Relation FERRP Flood Emergency Reconstruction and Resilience Project GoPb Governnment of Punjab IPSAS International Public Sector Accounting Standards ISSAI International Standards of Supreme Audit Institutions M&F Monitoring & Evaluation MIVRA Multi Hazard Vulnerability Risk Assessment NC National Competitive Bidding NGO Non- Governmental Organization PA MI Project Administrative Manual PDMA Provincial Disaster Management Authority IU Project Implementation Unit PKR Pakistani Rupees PRA Public Procurement Regulatory Authority USS United States Dollars WB World Bank PREFACE The Auditor General of Pakistan conducts audits under Articles 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 the Disaster and Climate Resilience Improvement Project (DCRIP), implemented by Project Implementation Unit, Provincial Disaster Management Authority (PIU-PDMA) was carried out accordingly. The Dircectorate General Audit, Disaster Management Islamabad conducted audit of the Disaster and Climate Resilience improvement Project (DCRIP) during September, 2018 for the financial year 2017-18 with a view to reporting significant findings to stakeholders. Audit examined the economy, efficiency and effectiveness aspects of the Disaster and Climate Resilience Improvement Project (DCRIP). In addition, Audit also assessed, on 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 taken, will help the management realize the objectives of the Disaster and Climate Resilience improvement Project (DCRIP). The Report consists of two parts. Part-I contains Auditor's Report (Audit Opinion) and Financial Statements. Part-Il contains Executives Summary. Management Letter and Audit Findings. The Report has been prepared for submission to the World Bank in terms of loan a-recment with Government of Pakistan. (Adnan I ique Director General Deceimber 21,2018 Islamahad 2 PART-1 1. PROJE'CT OVERVIEW 2. AU)1 I FORS REPOR' TO THE MANAGEMENT 3. FINANCIAL STATEMENTS 3 PROJECT OVERVIEW Name of project: Disaster and Climate Resilience Improvement Project (DCRIP) Sponsoring authority: World Bank Executing authority: Project implementing Unit, Provincial Disaster Management Authority. Punjab (PIU-PDMA) WB Loan No: 5686-Pak PC-1 cost: Rs 1,089 million Date of conniencenent: July 30. 2015 Actual (late of comniencement: August 31, 2015 Date of completion (as per PC-I): June 30, 2018 Date of Approval by ECNEC: July 09, 2015 Original loan closing date: December 01, 2019 Progressive loan utilization status upto FY 2017-18: Rs 259.55 million 4 AUDITOR'S REPORT TO THE MANAGEMENT Mr. Rashad Ahmed Khan, Project Director Project Implementation Unit DCRIP (WB), 1 9-Aibak Block, New Garden Town. Lahore Auditor's Report on the Financial Statement of the DCRIP We have audited the accompanying financial statements of Disaster and Climate Resilience Imiprovement Project comprising Statements of Receipts and Payments, Statement of Comparison of Budget and actual expenditure together with the notes forming part thereof for the year ended June 30, 2018. Management Responsibility It is the responsibility of project management to establish and maintain a systen of internal controls, and prepare and present the Statement of Cash, Receipts and Pavnents in conlormity with the requirements of Cash Basis IPSAS, Financial Reporting under the Cash Basis of Accounting Standard. Auditor's Responsibility [he responsibility of the auditor is to express an opinion on the financial statements based on the audit conducted. We conducted our audit in accordance with the International Standards of Supreme Audit Institutions (ISSAis). These standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free of material misstatements. The audit process includes examining, on a test basis, evidence supporting the amounts and disclosures inl 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. Opinion In our opinion: a) The (inancial statements present fairly, in all material respects, the cash receipts arid payments by the project for the year ended June 30, 2018 in accordance with Cash Basis IPSAS, Financial Reporting under the Cash Basis of Accounting Standard. b) The expenditure has been incurred in accordance with the requirements of lcp agreements. (Adnan R.I Director Genera Directorate General Audit Disaster Management Islamabad Dated: 2..12.2018 5 FINANCIAL STATEMENTS FOR THE YEAR ENDED ON JUNE 30, 2018 6 PROJECT IMPLEMENTATION UNIT DCRIP(WB), FERRP(ADB) PROVINCIAL DISASTER MANAGEMENT AUTHORITY, PUNJAB GOVT OF THE PUNJAB R -: 2019/ /PIU-PDMA,FD 03-10-2018 Director General (Audi Disaster Management, epartmnent of the Auditur-General of Pakistan, First Floor, Block B-L, lenevolent Fund Building Zero Point, Islainabod lX'r \iuwRatique He are writing at your request to conlrn several representations that we have made to you durn1 your examination of Annual Financial Statements of Disaster and Climate Resilience !unm ecnt PtiecL (DCRIP) for the year ended 30 June 2018. Your examination was ma.ide tor the purpose ot' expressing an opinion by the Auditor-General as to whether the financial SaItL'mt properly present in all material respects, of the financial position of DCRIP as at 30 June 2018, the results of its operations and its fund flows for the financial year then ended are in ontormniiv with the approved accounting procedure and polices. He confirm, to the best of our knowledge and belief, the following representations made to the audit team during the examination: I It is the responsibility of management of this entity to fairly present in the accounts the recoipts and paynt conformity with the approved accounting procedure and polices .-\lI accounting and financial records and related data of the entity have been made L\ ailable to the audit team as required under the Auditor-Generals (Functions and Pov,ers. Terms and Conditions of Service) Ordinance, 2001. . There are no irregularities involving management or employees who have significant roles in the system of internal accounting control or any irregularities involving other CilpIoyees that could have a material effect on the accounts and that have not been disclosed to the audit team. -1. [here are no violations or possible violations of laws or regulations whose effect should be considered for disclosure in the accounts, which have not already been disclosed. 5. ihere are no deficiencies in or non-compliance with financial reporting reqiuiremienits as specified by donor and its polices that could have a tnaterial effect on the fair presenation of accounts. 6. All cash and bank accounts the entity are inciuded in the accounts as at 30 June 2018- The ci6ity has satisfteory title to all owned assets. 7. There arC no other material liabilities or gain or loss contingencies that are required to be :ccrued or disclosed as required under the approved accounting procedure and polices. There are also no unasserted claims or assessments which must be disclosed. 8. Commitments for purchases and services are against a valid contract/agreement as required 19-Acok [ D +92 42 99232198 a *wwpLu pdma.gop.pk e ,i t ah(ire $ +92 42 99232104 I g suppor piu@pdma.gop.pk 7 PROJECT IMPLEMENTATION UNIT DCRIP(WB), FERRP(ADB) PROVINCIAL DISASTER MANAGEMENT AUTHORITY, PUNJAB GOVT OF THE PUNJAB under the approved accounting procedure and policy and are for quantities not in c ess of the anticipated requirceents and at a price, which will not result in loss 9. [he accounts and appended notes include all disclosures necessary for a fair presentation of the financial position and results of operations of the entity in accordance with the stated accounting procedures / policies, and disclosures otherwise required to be included therein by the laws and regulations to which the entity is subject. 10. No matters or occurrences have come to our attention up to the present time which \iiould affect the accounts and related disclosures for the Financial year ended 30 June 2018 or, although not affecting accounts or disclosures, have caused or are likely to cause any material change, adverse or otherwise, in the receipts and payments of the entity. Director 1i nance PH PI 11&P1IFl-P DMA SA Bclk +92 42 09232198 wwwPi.pmagoPpk Now Gar Twn, Labora U +92 A2 99232194 t SuppOftUpU@POrna 900 pk 8 WB Løan 5686-K : Disasler and Climate Resilienc Ifmprovement Project I'roject Implementaiun Unit : Provincial Disaster Management Authori"y (PIU-PDNIA) Starenient of Cash Receipls and Pavments Fur the year ended 30 June 2018 F 201-18 FY 2016-1- (PKR in millions) (PKR in millionA) Receipts;/ amrr Receipts Paymets R PaymenIs Note p by Third Payrents by Third Controlled Cutrulled Pb PW Iarcies by PI- Parti" Receiptis Gover.menI Funds $ - - - Wl Funds 6 32-L218 -729 Total Receipts 324.218 4."29 - Paym(len is Lvi] Works 7 - - E.quipment & Vehicies 8 92.857 - 50.070 Consulting, Services - Project Management 9 26.652 -.729 3-825 - Capacily Building - Incremental Cost 10 61.46-1 - 24.683 Tutal Pavinents 180.973 4-29 ~3.58 Increase (Dereasc) in Cash Cash at beginning of ycar 121.197 9.7% nercase LDerease) in Cash 12 143.215 - S i C-sh at end of ycar 264.412 121.19 P repare L -, CheckedB 9 WI l.män ffP :miser 41111 Clirmoje FJCe'CClee iprokvemýent Pirvject 1P rljcci lIplemien Ihtatili nt : r ril D)ikld er M anvéenenI Au IJI.rity (11 lP MA siflemnit (kr ompmrisiii f luir e nd lr( ArvIli t( dfa it oF Pymlenl hy Vuncli~nI fr Ilie year codel 301 .Jite 21>18 FY 21117-IS FV 2014-7 (PMlR in näflijov) OIR in niiiienqt Differenre of l Iifference of Nolc *Actua1 Budget 13udget anli 'AcIu2 Budget Fludgir 2Mf Actual Actua1 'us Iii nows Go)4vCI41Emmem lk]nti 5 -- ,XH miittd 6 32k1947 328947 -- K il k,: i 328.947 32 X,947) Ula.,h Outllows Wi ork--- - . ua, ( - - quipymcn[ & VehicIc 7 92,857 501069 ½P / ta! B 92.852 .192.857) 50.069 - Iroje1c lfarmIgemLllLm 31.381 3,25 - Cap Lty [illing - h b i t 31.381 31381 3,825 llurcmnlerl (Lost 8 61464 24,683 .S:ii /D 61464 - (61 A 1 24.683 - Total Paymnents 185102 5511000 (364.298) 78,577 450.000 <371.423) (At1-C + D) l Net Casi F elromws 143245 143.245 (78,577) (450.000 371.423 *Acku, rmounts encompass both cash and third party sEtllemrents Prepared - - Checked By. 10 Disaster and Climate Resilience improvement Project (OCRIP) Notes to the Financial Statements For the Year ended 30 June 2018 1. Reporting Entity The financial statements are for Disaster and Climate Resilience Improvement Project (DCRIP). The financial statement encompasses the reporting entity as defined in the Financing Agreement between the Islamic Republic of Pakistan and the World Bank. The Financing Agreement was signed on 30/07/2015 for an amount of SDR 88,900,000 equivalent to US $ 125,000,000 (loan 5686-PK) including amount allocated for POMA component i.e. US S 10,470,000. The project became effective from 31/08/2015 with the closing date of 01/12/2019. The Project is implemented through Project Implementation Unit, Provincial Disaster Management Authority, Government of the Punjab alongwith other components through Irrigation Department, P&D Department and C&W Department. Financing Loan 5686-PK: The financing is made in the form of Credit based on World Bank terms, with a loan term of 25 years and maturity of 16.95 years, including a grace period of 05 years. The Financing Agreement No is Credit Cr 5686-PK Responsible Agency A primary responsibility for overall progress and management of PDMA component of the Additional Financing has been entruste,. to Provincial Disaster Management Authority (PDMA), Government of the Punjab. 2. Certification by Project Management on Application of Funds The Disaster and Climate Resilience Improvement Project (DCRIP) management certified that the funds have been applied/expenditure have been incurred for the purpose intended in the financing agreement. 3. Accounting Convention and Statement of Compliance The financial statements have been prepared in accordance with Cash Basis IPSAS Financing Reporting under the Cash Basis of Accounting. The accounting policies have been applied consistently throughout the period. 4. Significant Accounting Policies 4.1 Foreign Currency Transaction Prepared ........ Checked BY1rI~ -- Cash receipts and payments arising from transactions in foreign currencies are recorded in Pak Rupee by applying to the foreign currency amount, the exchange rate between the Pak Rupee and the Foreign Currency at the date of the receipts. 4.2 Reporting Currency All amounts in the financial statements are in Pak Rupee, 4.3 Revenue Recognition Revenue in recognized on the date of receipt of money by bank or clearance of cheque. Revenue is recognized on gross basis and any related costs are recorded separately. 4.4 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. 4.5 Employee Terminal Benefits Service benefits of government deputations employees are accounted for in their respective departments while no service terminal benefits are paid to the contractual employees. 4.6 Payments by Third Party The payments made by third parties do not constitute cash receipts or payments controlled by the Project but do benefit the Project as the Project does not receive cash (including cash equivalents) directly from, or gain control of the bank accounts or similar facility established for its benefit by, the third parties. Payments by third parties, if any, are disclosed in the Payments by third parties column on the face of Statement of Cash Receipts and Payments and notes to the financial 5. Counterpart Funds The project is 100% World Bank funded and does not involve any counterpart funding. 6, External Assistance External assistance was received in the form of Credit from the World Bank under financing agreement dated 30/07/2015 between the World Bank and Government of Pakistan (GOP) for the purpose of the Disaster and Climate Resilience Improvement Project. The following amounts were received by the Project during the period. Prepared..agoI* ml 1 Checked By).t4 2017-18 2016-17 Loan No, 5686-PK US $ Pak Rupees US $ Pak Rupees 34217,783.0 SE Procedures 6.1 2,934,99800 324, Direct Payment 6.2 41,103,43 4,729,02478 Commitment Letter - - 2,976,101.43 328,946,807.78 - 6.1 This represents funds transferred to the Disaster and Climate Resilience Improvement Project's Designated Assignment Account by the World Bank on the basis of Withdrawal Applications submitted by the Project. 6.2 Direct payments represent amount paid directly by the World Bank on behalf of the project in respect of goods and services procured/imported by the Project. The payments were made on the basis of Withdrawal Application submitted by the Project. 6.3 There has been no instance of non compliance with the terms and conditions of the financing agreement between the World Bank and GoP which have resulted in cancellation of Credit. 6.4 Undrawn External Assistance Undrawn Credit at reporting date represent amounts specified in the financing agreement between the World Bank and GOP that the World Bank will disburse for Disaster and Climate Resilience Improvement Project (DCRIP) project purposes. Loan No. 5686-PK - 2017-18 2015-17 PDMA Component us $ millions US $ millions Closing Balance 5.585 8.561 5.585 8.561 7. Civil Works Loan No. 5686-PK 2016-17 2015-16 Note Amounts in Pak Rupees Individuals Checked By. 13 Firms 8. Equipment and Vehicles Loan No. 5686-PK 2017-18 2016-17 Amounts in Pak Rupees Transport 57,794,302 18,082,2&0 Mobile Communication Office 5.107,075 15,207,454 IT Equipment 13,953,782 4,845,742 Machinery & Equipment 5,960,038 115,821 Furniture & Fixture 42,120 11,748,666 Software - 69,600 92,857,317 50,069,543 9. Consulting Services Loan No. 5686-PK 2017-18 2016-17 Note Amounts in Pak Rupees Individuals 9.1 9,707,158 Firms 9.2 21,673,691 3,824,925 31,380,849 3,874,925 9.1 Consulting Services (Individual Consultants) Loan No. 5686-PK 2017-18 2016-17 Not Amounts in Pak Rupees e Consultant - Disaster Risk Financing (National) 2,000,000 Consultant - Disaster Risk Financing (International) 7,410,158 prepared........ce 14 Climate Change Expert 297,000 9,707,158 9.2 Consulting Services (Firms) Loan No. 5686-PK 2017-18 2016-17 Not e Amounts in Pak Rupees Capacity Assessment, Gap Analysis and Model Study 11,940,240 2,985,060 Development of integrated Disaster Management Information System for PDMA as well as for DDMAs 2,519,595 839,865 (MIS) Community Based Disaster Risk Management and formulation of early warning dissemination system 7,213,856 - 21,673,691 3,824,925 10. Incremental Cost Loan No. 5686-PK 2017-18 2016-17 Note Amounts in Pak Rupees Remuneration and Salaries 10.1 50.901,048 21,524,667 General Operating Expenditures 10.2 10,562,969 3,158,031 61,464,017 24,682,698 10.1 Remuneration and Salaries Loan No. 5686-PK 2017-18 2016-17 Amounts in Pak Rupees Salaries - Officers 38,219,312 16,778,424 Salaries - Staff 12,506,286 4,746,243 Gratuity (Honoraria) 175,450 - Prepared.................1.. Checked 15 50,901,048 21,524,667 10.2 General Operating Expenses Loan No. 5686-PK 2017-18 2016-17 Note Amounts in Pak Rupees Repair & Maintenance 10.2.1 390,597 256,260 General Operating Expenses 10.2.2 7,246,769 1,921,168 Utilities 10.2-3 2,925,603 980,603 10,562,969 3,158,031 10.2.1 Repair and Maintenance (R&M) Loan No. S686-PK 2017-18 2016-17 Amounts in Pak Rupees R&M - Transport 142,916 28,599 R&M - IT Equipment - R&M - Machinery & Equipment 82,885 R&M - Furniture & Fixture R&M - Office Building 164,796 213,594 R&M - Generator 24,067 390,597 256,260 10.2.2 General Operating Expenses Loan No. 5686-PK 2017-18 2016-17 Amounts in Pak Rupees Newspapers, Periodicals and Books 3,380 872 Courier & Pilot Service 60,0104,6 POL for Generator 243,125 81,988 Prepared ............... a' Checked ByZ ...... 16 P'1ting & Publication 105,838 790 POL 489,013 248,739 Stationery 572,159 488,227 Advertislng & Publicity 206,421 311,245 brtertarnments & Gifts 355,849 74,899 Parnent to Others for Services Rendered 2,063,464 - Travelling Allowance 1,638,852 471,079 Rent of Office Building 1,089,000 Others 419,658 239,266 7,246,769 1,921,168 102.3 Utilities Loan No. 568b-PK 2017-18 2016-17 Note Amounts in Pak Rupees Internet 795,282 349,400 Gas Charges 27,100 6,090 Water Charges 19,234 58,575 Electricity Charges 1,378,247 435,495 Telephone Charges 705,740 131,043 2,925,603 980,603 11. Cash and Bank Loan No. 5686-PK 2017-18 2016-17 Amounts in Pak Rupees Cash in Hand - - Cash at Bank 264,442,657 121,198,032 264,442,657 121,198,032 Prepared ......... Checked By..0C& 17 12. Commitments Loan No. 5686-PK 2017-18 2016-17 Amounts in Pak Rupees Contractor Liabilities Obligation under contract Outstanding/ Returned Cheques 5,320,269 (to be renewed in next financial year Pending Litigation and Claims 5,320,269 - 13. Authorization for Issue These financial statements have been authorized to be issued by the Project Director on 14/11/2018. 14. General Figures have been rounded off to the nearest amount. Comparative figures have been rearranged where necessary for the purpose of comparison. Project Director Note: The above breakups and disclosures are not exhaustivehese are for general guidance purposes only. The management may include breakups and disclosures tailored to project's nature of activities. AI prepared ........... . Checked By..%m / 18