13 JUN 2017 RECEIVED Ministry of Natural Resources and Environment' Department of Water Resources ong Integrated Water Resources Management Pri (M-IWRMP) Project No. P104806/IDA Grant H675-LA Financial Statements and MEMma Member Firm of KPMG International V Ministry of Natural Resource and Environment Department of Water Resource Mekong Integrated Water Resource Management Project (M-IWRMP) Project No. P104806/IDA Grant H675-LA Contents Page Project information 1 Statement of management's responsibilities 2 Independent Auditors' Report 3-5 Statement of cash receipts and payments 6 Statement of designated bank account 7 Notes to the financial statements 8 -14 Budget and actual payments 15-16 Project Information Project Mekong Integrated Water Resources Management ("M-IWRMP") IDA Grant No. H675-LA Funding Agencies International Development Association ("IDA") Duration 1 1h May 2012 to 31" March 2018 Project Director Mr. Chanthanet Boualapha (Project Director) Registered Office Ministry of Natural Resource and Environment Department of Water Resource Vientiane Capital, Lao PDR Auditors KPMG Lao Co., Ltd. 1 Ministry of Natural Resources and Environment Department of Water Resources Mekong Integrated Water Resources Management Project (M-IWRMP) Statement of Management's Responsibilities It is the responsibility of management to prepare financial statements of the Mekong Integrated Water Resources Management Project ("the Project") for the period from 1 January 2016 to 31 December 2016, which are prepared in all material respect in accordance with the accounting policies as described in Note 2 to the financial statements. In preparing these financial statements, management is required to: * Select suitable accounting policies and apply them consistently; * Make judgments and estimates that are reasonable and prudent; * Maintain financial records and prepare the financial statements based on the accounting policies as described in Note 2; and * Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Project will continue its operations. Project Management of Mekong Integrated Water Resources Management Project is responsible for keeping proper accounting records, which disclose with reasonable accuracy, at any time, the financial position of the Project. Members of project management have a general responsibility for taking such steps as are reasonably available to them to safeguard the assets of the Project and to prevent and detect fraud and other irregularities. Project Management confirms that the Project has complied with the above requirements in preparing the financial statements. On behalf of the management thanet BOUALAPHA Mr. Ounakone XAYVILIYA Project Director Project Manager, Department of Water Resources Finance Department Ministry of Natural Resources and Ministry of Natural Resources and Environment, Lao PDR Environment, Lao PDR 'Date: 8 JUN 2011 Date: 108 JUN 2011 2 KPMG Lao Co.,Ltd. Uffn EV@ o 4nfib 3rd- 4th Floor, 37 K.P. Tower :q 3-4, 37 in wmmoc5 23 Singha Road, Ban Phonexay, ceu-bu 23 90mg, 9nultuuj't, Saysettha District, P.O. Box 6978 000mn , U.3i. 6978, Vientiane Capital, Lao PDR tJeeULoloJJ , dd 290 Tel +856 (21) 454240-7 1 +856 (21) 454240-7 Independent Auditors' Report To the Project Management, Mekong Integrated Water Resources Management Project Opinion We have audited the financial statements of the Mekong Integrated Water Resources Management Project ("M-IWRMP" or "the Project"), which comprise the statement of cash receipts and payments for the period from 1 January 2016 to 31 December 2016, the statement of designated bank account, for the period then ended, and notes, comprising a summary of significant accounting policies and other explanatory information from page 6 to page 14. The financial statements have been prepared by the management of Project using the basis of financial statements preparation and accounting policies as described in Note 2 to the financial statements. In our opinion, the accompanying financial statements of the Project for the period ended 31 December 2016 are prepared, in all material respects, in accordance with the accounting policies as described in Note 2 to the financial statements. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Project in accordance with the ethical requirements that are relevant to our audit of the financial statements and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. KPMG LaoCo Ltd a Company licensed underthe Foreign Investment Lawof Lao PDR, isa memberof KPMG International, a Swiss cooperative 3 Emphasis of Matter We draw attention to Note 2 to the financial statements, which describes the basis of accounting. The financial statements are prepared to provide information to the Project Management of Mekong Integrated Water Resources Management Project to report to the donor IDA. As a result, the financial statements may not be suitable for another purpose. Our report is intended solely for the Project management and the donor IDA and should not be used by parties other than the Project management and the donor IDA. Our opinion is not modified in respect of this matter. Responsibilities of Management for the Financial Statements Management is responsible for the preparation of the financial statements in accordance with the accounting policies as described in Note 2, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Project's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Project or to cease operations, or has no realistic alternative but to do so. Auditors' Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. KPMG Lao Co, Ltd a Company licensed under the Foreign Investment Lawof Lao PDR, is a memberof KPMG International, a Swiss cooperative 4 * Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Project's internal control. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. 0 Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Project's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Project to cease to continue as a going concern. We communicate with management regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. KPMG Lao Co., co To Vientiane Capital, L6 Date: a18 CJUN 2017 2KPMG Lao Co., Lid, a Company licensed nraler the Foreign Invostment Law of Lao PDR, is a maember of KPMG Interaional, a Swiss cooperative 5 Ministry of Natural Resources and Environment Department of Water Resources Mekong Integrated Water Resources Management Project (M-IWRMP) Statement of cash receipts and payments Year ended 31 December 2016 V 31 December 31 December 2016 2015 Note USD Receipts 3 5,538,166 4,281,139 Payments Goods and Vehicles 4 524,683 298,719 W Civil works 5 2,571,020 2,402,119 Consultant services 6 928,307 854,187 Training and workshops 7 201,364 676,300 U Incremental Operating Costs 8 583,903 602,198 Sub-Grants 9 250,779 28,281 Total 5,060,056 4,861,804 Excess of receipts over payments 478,110 (580,665) Fund balance at the beginning of the period 516,524 1,097,189 Fund balance at the end of the period 994,634 516,524 Represented by: Cash on hand and cash at bank 10 994,634 516,524 994,634 516,524 Mr. anet BOUALAPHA Mr. Ounakone XAYVILIYA Project Director Project Manager, Department of Water Resources Finance Department Ministry of Natural Resources and Ministry of Natural Resources and Environment, Lao PDR Environment, Lao PDR Date: D8 JUN 2017 Date: Al JUN 2017 6 Ministry of Natural Resources and Environment Department of Water Resources Mekong Integrated Water Resources Management Project (M-IWRMP) Statement of designated bank account Year ended 31 December 2016 31 December 31 December 2016 2015 Note USD USD Receipts 3 4,416,904 4,056,253 Balance at the beginning of the period 238,173 1,038,595 4,655,077 5,094,848 Payments Payments made out of project's accounts (4,011,338) (4,856,675) 643,739 238,173 Represented by Cash at designated bank account 10 643,739 238,173 643,739 238,173 Department of Water Resources FnneDprmn :6 ~~~Ministry of Natural Resources andMistyoNaulReursan :3 U Mr OUAAPHAMr. Ounakone XAYVILIYA Projet DirctorProject Manager, Depatmet o Watr RsoucesFinance Department Minitryof atual RsoucesandMinistry of Natural Resources and Environment, Lao PDR Environment, Lao PDR M a:Date: JUN 201 U 7 Ministry of Natural Resources and Environment Department of Water Resources Mekong Integrated Water Resources Management Project (M-IWRMP) Notes to the financial statements Year ended 31 December 2016 1. Principal activities Mekong Integrated Water Management Project ("the Project") was funded by International Development Association in accordance with the Financing Agreement Grant No. H675-LAO dated on 19 April 2012. The total grant for the Project is eleven million eight hundred thousand Special Drawing Rights (SDR 11,800,000) which will be used to assist in financing the Parts 2 and 3 (herein referred to as Components) of the Project as described below: i) Part 2: National Water Resources Management; ii) Part 3: Improved Floodplain in Aquatic Resources Management in Regionally Significant Areas. The objective of the Project is to establish key examples of IWRM practices in the Lower Mekong Basin at the regional, national and sub-national levels, thus contributing to more sustainable river basis development in the Lower Mekong Basin. The project will support the following three components: Component 1: Regional Water Resources Management, the objective is to provide/ensure the overall framework as well as the implementation of Mekong River Commission principles, procedures and guidelines for IWRM and water utilization negotiations including dialogue with the upper riparian countries, within which the national and trans- boundary work will be framed. This Component's activities are specified in the Mekong River Commission's Mekong integrated Water Resources Management Project Document. Component 2: National Water Resources Management. The Key Objective of this component is to support institutional, policy and human resources strengthening to implement IWRM in Lao PDR (which accounts for over 30 percent of the Basin's flow). Thus improving water management in the Lower Mekong Basin as a whole. These components comprise five sub-components: (2-1) Support for Drafting a Water Resources Law through support to the department of water resources within the Ministry of Natural Resource and Environment ("MONRE") (formerly known as the Water Resource and Environment Administration ("WREA") (building on policy and strategy work supported by AusAID); (2-2) Support for Water Quality and Aquatic Ecosystem Health, including support to a water quality monitoring laboratory; (2-3) Support for Water Resources Modelling, including review and selection of appropriate, adapted models, technical assistance and training; (2-4) Support for Hydro-met Network Upgrading, and strengthening of flood and drought warning systems, through provision of equipment and training to the department of Meteorology and Hydrology within MON RE; and (2-5) Component Management. 8 Ministry of Natural Resources and Environment Department of Water Resources Mekong Integrated Water Resources Management Project (M-IWRMP) Notes to the financial statements Year ended 31 December 2016 1. Principal activities (continued) Component 3: Improved Floodplain in Aquatic Resources Management in Regionally Significant Areas. The objective is to support the improved management of river basins and floodplains in the key tributaries which are critical for fish spawning and as aquatic habitat for the mainstream and Lower Mekong Basin. This Component comprises three sub-components: (3-1) River Basin and Floodplain Management in Pilot Tributaries of the Lower Mekong Basin - Lao PDR. This in turn comprises three main activities which are described in this Project Implementation Plan (PIP) Volume 3: (3-1-1) Strengthening management in Priority River Basins of the Xebangfai and Xebanghieng River Basins; (3-1-2) Upgrading of existing infrastructure for enhanced environmental benefits; and (3-1-3) Subcomponent Management. (3-2) Support for Improved Management of Aquatic Resources in the Mainstream Mekong and Sekong. This in turn comprises three main activities which are described in PIP Volume 4: (3-2-1) Support for establishing Community-managed Fisheries Management Organization in Lao PDR (Champasak, Attapeu and Sekong Provinces); (3-2-2) Support for Public Sector Fishery Management; and (3-2-3) Sub-component Administration and Management. A 2. Summary of significant accounting policies The following significant accounting policies have been adopted by the Project in the preparation of these financial statements: (a) Basis of financial statements preparation The financial statement of the Project, which is expressed in United States Dollars ("USD"), has been prepared in accordance with the modified cash basis of accounting. The accounting policies have S been applied consistently throughout the period. A (b) Fixed assets 2 All purchases of fixed assets are recorded as payments in the statement of cash receipts and payments upon acquisition. The Project maintains a Fixed Assets Register for control purposes. (c) Cash Cash comprises cash on hand and balances with banks. a9 Ministry of Natural Resources and Environment Department of Water Resources Mekong Integrated Water Resources Management Project (M-IWRMP) Notes to the financial statements (continued) Year ended 31 December 2016 2. Summary of significant accounting policies (continued) (d) Foreign exchange The Project maintains its accounting records in USD in accordance with the financial agreement. All cash is held in USD. Transactions in currencies other than USD during the period have been translated into USD at rates approximating those ruling at the transaction dates. All exchange differences are recorded in the statement of cash receipts and payments. (e) Accounting reporting period The financial accounting year of the Project starts on 1 January and ends on 31 December. (f) Comparison of budget and actual payments The approved budget is developed on the same accounting basis, same classification basis and for the same period as for the financial statements. (g) Receipt recognition Fund receipt from funding agencies and administered by IDA is recognised as receipt when cash is credited to the project's designated account at the Bank of Lao PDR. The IDA may make direct payments, at the Project's request, directly to a third party for eligible expenditures. (h) Payments recognition Payments incurred in the frame work of the Grant Agreement are recognised on the cash modified basis of accounting. U1 Ministry of Natural Resources and Environment Department of Water Resources Mekong Integrated Water Resources Management Project (M-IWRMP) :2 Notes to the financial statements (continued) Year ended 31 December 2016 2. Summary of significant accounting policies (continued) (i) Mekong Integrated Water Resources Management Project categories of payments Expenditures in the statement of cash receipts and disbursements are grouped into the following categories and defined as follows: 1) Goods and Vehicles These consist of the purchasing more office computer and office equipment, furniture, field equipment and vehicles. 2) Civil Works These consist of payment of building construction such as: new office construction and renovation, construction of laboratory, drilling and electric pumps, and construction of water canal 3 improvement. 3) Consultants Services Any entity or person that may provide or provides the services to the Project under the contract. 4) Trainings and workshops These consist of trainings, workshops, conferences, study tours, fellowships and scholarships programme but excluding (a) any cost provided through consulting services contract; and (b) salaries of officials of the Project's civil service. 5) Incremental Operating Costs M These consist of payments to cost of goods, consulting and non-consulting services required for the day-to-day implementation of the Project, incurred by the Project, including consumable materials and supplies, communications services (postage, telephone and internet), media and printing services, translation and interpretation services, office space rental and utilities, leasing and/or routine repair and maintenance of vehicles, equipment, facilities and office premises, fuel costs, bank and insurance charges required for the project, administrative support staff, and Project staff travel, lodging and per diems, but excluding salaries (including bonuses, fee and honoraria or equivalent payments) of officials of the Project's civil service. 6) Sub-grant This is the expense of the component 3 for improving floodplain in aquatic resources management in regionally significant areas. Also to support the establishing community-managed fisheries management organization in Lao PDR especially Champasak, Attapeu and Sekong province. (j) Advances Advances, for activities such as workshops, conferences, monitoring trips, are reimbursable to the project until expensed by the Implementing Agencies ("IA"). Advances are recognized as expenditure after the advance has been liquidated and the expenses reports are approved. Advances are requested by IA from the Project through formal advance request forms. UI Ministry of Natural Resources and Environment Department of Water Resources Mekong Integrated Water Resources Management Project (M-IWRMP) Notes to the financial statements (continued) Year ended 31 December 2016 3. Receipts 31 December 31 December Description Ref Date 2016 2015 USD USD Fund transfers 14th Replenishment 0014 17 February 2015 703,815 15th Replenishment 0015 10 March 2015 679,474 16th Replenishment 0016 28 April 2015 350,476 17th Replenishment 0018 14 July 2015 676,671 19th Replenishment 0020 25 August 2015 978,198 20th Replenishment 0021 4 December 2015 667,619 21st Replenishment 0022 2 January 2016 700,566 23rd Replenishment 0025 22 March 2016 918,611 - 24th Replenishment 0026 3 May 2016 692,009 - 26th Replenishment 0027 7 June 2016 542,600 - 28th Replenishment 0030 6 September 2016 842,431 29th Replenishment 0031 15 November 2016 720,687 - 4,416,904 4,056,253 Direct payments 18th Replenishment 0019 16 July 2015 . 224,886 22nd Replenishment 0022 29 January 2016 449,735 25th Replenishment 0025 7 June 2016 359,186 27th Replenishment 0027 19 July 2016 312,341 Total Fund Receipts 5,538,166 4,281,139 4. Goods and vehicles 31 December 2016 31 December 2015 UJSD USD Project vehicles 49,750 169,604 Office equipment and tools 474,933 129,115 524,683 298,719 12 Ministry of Natural Resources and Environment Department of Water Resources U Mekong Integrated Water Resources Management Project (M-IWRMP) Notes to the financial statements (continued) Year ended 31 December 2016 5. Civil works 31 December 2016 31 December 2015 USD USD Constructions 2,468,924 2,300,484 Office constructions 102,096 101,635 2,571,020 2,402,119 6. Consultant services 31 December 2016 31 December 2015 USD USD Staff costs - component 2 261,515 485,315 Staff costs - component 3 666,792 368,872 928,307 854,187 7. Training and workshops 31 December 2016 31 December 2015 USD USD Training, workshop and seminar 201,364 674,883 Study visit and tours - 1,417 201,364 676,300 8. Incremental operating costs 8. In re e ta pe ain os31 Decem ber 2016 31 D ecem ber 2015 USD USD Incremental operation costs 59,306 313,899 Supporting staff costs 89,582 76,890 Meeting expenses 136,261 77,505 Mission and supervision 298,754 133,904 583,903 602,198 9. Sub-grants 31 December 2016 31 December 2015 USD USD Medical Equipment for Vaccination and Livestock U Materials - 23,531 Rural infrastructure Development 184,269 - Livelihood Demonstration 66,510 - Other - 4,750 250,779 28,281 13 Ministry of Natural Resources and Environment Department of Water Resources Mekong Integrated Water Resources Management Project (M-IWRMP) Notes to the financial statements (continued) Year ended 31 December 2016 10. Cash on hand and cash at bank 31 December 2016 31 December 2015 USD USD Cash at designated account 643,739 238,173 Cash at bank 350,424 278,263 Cash on hand 471 88 994,634 516,524 1 S A :0 A :9 A A A A 14 … - - - -- - 궉 1- 긔 -,-,-，丁i 训