Ref. No. 2075/76(2018/19) - INDEPENDENT AUDITOR'S REPORT The Secretary April 15, 2019 Ministry of Finance Singh Durbar, Kathmandu. Report on the Financial Statements We have audited the accompanying Project Financial Statements including Statement of Designated Account and Statements of Expenditures (SOEs) of the " Scaling -up Renewable Energy Program (SREP)" financed by IDA Grant No. TF 016552 NP" as at 16 July 2018 (32 Ashad, 2075) and for the year then ended and a summary of accounting policies and other explanatory notes. Management's Responsibility for Financial Statements Management is responsible for the preparation and fair presentation of the Financial Statements in accordance with the Government of Nepal (GON) accounting policies and relevant practices. This responsibility includes: designing, implementing and maintaining internal control relevant to preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud and error. Auditor's Responsibility Our responsibility is to express an opinion on these Project Financial Statements based on our audit. We conducted our audit in accordance with the INTOSAI (International Organization of Supreme Audit Institutions) Fundamental Auditing Principles. Those Principles require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements 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 entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion Management letter highlighting areas for improving financial management is attached herewith. In our opinion, the Project Financial Statements including statement of Designated Account, in all material respects, give a true and fair view of the financial position of the " Scaling -up Renewable Energy Program(SREP) " as of 16 July 2018 and of the results of its operations and its cash flows for the year then ended in accordance with GON accounting policies. We also report that funds provided under IDA Grant No. TF 016552 NP and have been utilized for the intended purposes. In addition, with respect to SOEs, a) adequate supporting documentation has been maintained to support claims to donors for reimbursement of expenditures incurred; and b) expenditures are eligible for financing under the above m tioned Grants and Loan. (Baburam Gautam) Deputy Auditor General Audited Project Account Report 1 Scaling-up Renewable Energy Program (TF 016552NP) Summary of Sources and Uses of Funds Fiscal Year: 20171018 (2074/75) Period: 16 July 2017 to 16 July 2018 Amount in NPR . Notes to Cumulative up to Cumulative to Description Acut PeisFsalCurrent Fiscal Year Dt Account Previous Fiscal Date Budget Allocation(Proposed Budget of FY 016-17) 247,965,000.00 518,465,000.00 766,430,000.00, A. Opening Cash/Bank Balance B. Sources of Funds 84,501,302.25 61,338,355.00 145,839,657.25 GoN Fund 1 GoN Reimbursable Fund 1 49,477,721.00 (996,929.00) 48,480,792.00 IDA Funds Replenishable 1 - 6,941,888.00 6,941,888.00 IDA Funds 35,023,581.25 55,393,396.00 90,416,977.25 Total (A+B) 84,501,302.25 61,338,355.00 145,839,657.25 C. Uses of Funds by Category! Component Non consulting,Consultants services & training(Launch of online web portal,Third party verification,Provision of subsidy for partial financing of w2e) 26,825,765.75 13,656,450.00 40,482,215.75 DFS(Market reseach,BP,EMP etc) 6,267,430.00 6,746,836.00 13,014,266.00 Incremental operating(consumables,vehicle rental/leasing,equipment maintenance/repair,domestic travel,communication,bank charges,advertisement) 3,582,591.50 3,955,621.00 7,538,212.50 Reimbursable Part of Subsidy Payment* 47,825,515.00 36,979,448.00 84,804,963.00 Total 84,501,302.25 61,338,355.00 145,839,657.25 D. Closing Balance - Total (C+D) 84,501,302.25 61,338,355.00 145,839,657.25 Designated Account Statement 1 Opening Balance - 25,715,000 .00 - 2 Fund Received from IDA 61,824,777.36 13,336,376.80 75,161,154.16 3 Total Cash Balance (1+2) 61,824,777.36 39,051,376.80 75,161,154.16 4 Less: Transfer to GoN Treasury Account 34,629,137.50 20,003,295.00 54,632,432.50 5 Less: Direct Payment from Designated Account 394,443.75 - 394,443.75 6 Foreign Exchange Gain/Loss (+/-) (1,086,196.11) 1,218,051.12 131,855.01 6. Closing Balance (3-4-5+6) 25,715,000.00 20,266,132.92 20,266,132.92 Sushrut Dhaka[ uba Raj Acharya Nawa Raj Dhakal Yam Prasad Dhungana Financial Management Expert Chief Account Comptroller Act. Executive Director Under Secretary (Accounts) AEPC AEPC AEPC MoEWRI Dinesh Kumar Ghimire Surya Prasad Gautam Baburam Gautam Secretary Act. Financial Comptroller General Deputy Auditor General MoEWRI Financial Comptroller General Office Office of Auditor General Audited Project Account Report 2 Scaling-up Renewable Energy Program (TF 016552NP) Designated Account Reconciliation Statement & Cash Projection Iscal Year: 2017/018 (2074175) .16 July 2017 to 16 July 2018 Amount in USD Particulars Cumulative up to FY Reporting FY Cumulative to Date Remarks 2016/017 2017/018 1. Opening Cash Balance 250,000.00 2. Add Receipt of Funds 580,369.62 127,125.40 707,495.02 3. Total Cash Balance (1+2) 580,369.62 377,125.40 707,495.02 4. Less: (a) Transfer to GON Treasury from Designated Accou 326,692.62 191,775.73 518,468.35 (b) Direct Payment from Designated Account 3,677.00 - 3,677.00 5. Closing Designated Account Balance at the end of 250,000.00 185,349.67 185,349.67 Reporting Period (3-4) Sushrut Dhakal Yuba Raj Acharya Nawa Raj Dhakal Financial Management Expert Chief Account Comptroller Act. 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Value Date Category No. Date 1.00 2.00 3.00 4.00 Total Sub Total - - - - Tota I I Sushrut Dhakal `Yua Raj Acharya Nawa Raj Dhakal Yam Prasad Dhungana Financial Management Expert Chief Account Comptroller Act. Executive Director Under Secretary (Accounts) AEPC AEPC AEPC MoEWRI V4 Dinesh Kumar Ghimire Surya Prasad Gautarn Baburam Gautam Secretary Act. Financial Comptroller General DeputyAuditor General MoEWRI Financial Comptroller General Office Office of Auditor General Unaudited Financial Report Report 5 Scaling Up Renewable Energy Program Disbursement Fiscal Year: 20171018 (2074175) 16 July 2017 to 16 July 2018 NPR Withdrawal A lication Auth No. Value Date Category Initial No. Date 1 2 3 4 Total Deposit Total InitialDepositi 27,075,000.00 to Previous year 26,148,567.75 6,249,430.00 2,625,583.50 35,023,581.25 35,023,581.25 TF016552-7 5-Mar-18 4,366,453.00 3,218,533.00 1,168,589.00 8,753,575.00 8,753,575.00 TF016552-8 02-Mar-18 - - - 18,190,000.00 18,190,000.00 18,190,000.00 TF016552-9 12-Apr-18 - - - 24,141,989.00 24,141,989.00 24,141,989.00 TF016552-10 09-May-18 3,597,605.00 231,833.00 478,394.00 4,307,832.00 4,307,832.00 Sub Total 7,964,058.00 3,450,366.00 1,646,983.00 55,393,396.00 - 55,393,396.00 Total 34,112,625.75 9,699,796.00 4,272,566.50 - 90,416,977.25 - 117,491,977.25 USD Withdrawal Application Auth No. Value Date Category Initial No. Date 1 2 3 4 Total Deposit Total )to Previous year 250,000.00 Previous year 245,793.75 59,670.83 24,905.04 330,369.62 330,369.62 TF016552-7 13-Feb-17 5-Mar-18 42,732.95 31,498.66 11,436.57 85,668.18 85,668.18 TF016552-8 14-Mar-17 02-Mar-18 - - - 175,748.79 175,748.79 175,748.79 TF016552-9 20-Jun-17 12-Apr-18 - - - 232,716.30 232,716.30 232,716.30 TF016552-10 29-Jun-17 09-May-18 34,626.80 2,229.59 4,600.83 41,457.22 41,457.22 Sub Total 77,359.75 33,728.25 16,037.40 408,465.09 535,590.49 0.00 535,590.49 Total 323,153.50 93,399.08 40,942.44 408,465.09 865,960.11 .00 1,115,960.11 SDR Withdrawal A plication Auth No. Value Date Category Initial No. Date 1 2 3 4 Deposit Total Sub Total 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Total 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Sushrut Dhakal Yuba Raj Acharya Nawa Raj Dhakal Yam Prasad Dhungana Financial Management Expert Chief Account Comptroller Act. Executive Director Under Secretary (Accounts) AEPC AEPC AEPC MoEWRI Dinesh Kumar Ghimire Surya Prasad Gautam BaburamGautam Secretary Act. Financial Comptroller General Deputy Auditor General MoEWRI Financial Comptroller General Office Office of Auditor General Audited Project Account Note 1 Scaling-up Renewable Energy Program (TF 016552NP) GoN and GoN Reimbursable Funds/ IDA Funds Replenishable Fiscal Year: 2017/018 (2074175) 16 July 2017 to 16 July 2018 Amount in NPR Description Cumulative up to Current Fiscal Year Cumulative to Date Previous Fiscal Year GoN Fund Expenditure A Less: Source to be changed to IDA source Net GoN Expenditure GoN Reimbursable Funds: GoN Reimbursable Fund Expenditure 84,106,858.50 , 61,338,355.00 145,445,213.50 B Source to be changed from GoN source Less: Reimbursement Received 34,629,137.50 62,335,284.00 96,964,421.50 Net GoN Reimbursable Funds 49,477,721.00 (996,929.00) 48,480,792.00 C Total (D+E) 49,477,721.00 (996,929.00) 48,480,792.00 IDA Funds Replenishable (Designated Account Replenishable) Amount in NPR A Funds Transfer to GoN Treasury/ Direct Payment from IDA 35,023,581.25 62,335,284.00 97,358,865.25 B Less: Documented to IDA Credit C Less: Documented to IDA Grant 35,023,581.25 55,393,396.00 90,416,977.25 Net IDA Funds Replenishable (A-B-C) 6,941,888.00 6,941,888.00 Sushrut Dhakal Yuba Raj Acharya Nawa Raj Dhakal Financial Management Expert Chief Account Comptroller Act. Executive Director Unaudited Financial Report Note 2 Scaling Up Renewable Energy Program (TF016552NP) Fiscal Year: 2017/018 (2074175) 16 July 2017 to 16 July 2018 in NPR Reconciliation Statement 2017118 Description As per FCGO Records As per Project Account Difference Remarks Reimbursable Government Fund 48,480,792.00 48,480,792.00 7 7 Total 48,480,792.00 48,480,792.00 - О Ol 1� 00 lD W 1� О rn н n� �р ip О�D и N О 1� 01 � О N О� V и О V � О 1� т и и О т С О N 00 W � tp и с6 и lD V О О] N и � г� н N г� н г� н т со оо � г� т и н оо rn д о г� � и г�i пi пi о � а; � о о о н о о � н н н н н г и к ш О V О О ш О О и О О N О ш О н О ш а0 и н и О Ш о0 и N о0 О и о0 1� Oi т О 1� .-i ц� 01 00 .�-1 � д' V z о0 00 V N д' � С 7 О � � Q О н ор р� г� г� н О О н т т N О О т 00 N N h а0 О 1� lD и 01 и и О N lD W Ol д' ц7 и О г� и и т н" о �+- и ао оо т г� v v N � � � � � � С U � � � �. �' � � � � � и � � U � � � N � и с ш r � го го а ш _ .� � � го � � �т у ^ Н Н и ш С Q у С Ш � ш и 2] т'° Е °- и v � н о А Н � = г О Z н гса +� у" г° й � N� р и � и й v О Q о Z -а � � 3 � Q а Q = гса а > ш с � О � О � с г и Н ш Н Q о У а F � �- = ш f0 Z ш Z У р т � �� � n О � о ,Л -- � и ш и �., ^ n v иа а и т� ьл � и Q �t v с ш ш т а ш°и° р �3 и LL й � ш и rv °' Z Z� F z Q Q > � Q� т а т и ° ш т � `° р Н � а - С Ш К v ш г ш и F �' и ,л L Z � С � о_ � � � о Z ~ � � � й о � � � о ° v � � � � � > р Q � � К � � � v� о ш о � о ш� ш 1� 1� о0 ао о0 о0 о0 и н н н н н н н � О ш о J � О О о О О О О � о ¢ � � � � � � � � и ш и rv г� rn н � а�� �^ N т v� й � � v г� Z rv'^ � н N ш rv `r > а а � � � = и н ¢ � У � - � � ао о� оо со оо .. .. а � � н н н н н н н � у г � С О О О О О О О р � и т ` � � � � � � � � т� г ш и и г� г� rn н У г а н г� �� н�� и � �� т v� и � ш � Q и °i � � �' = v т и й О Scaling Up Renewabl , e Energy Programme Accounting Policy and Explanatory Note's 1. Project Background: IDA Grant TF 016552NP was signed of 7.9 Million US Dollar out of which 6.9 million is allocated for Reimbursable part of Subsidy Payment and balance for Technical Assistance. The grant/project agreement was approved on 24 November 2014. 2. Statement of Compliance Project Financial Statements have been prepared in accordance with Audit Guide of Project Financial Statements issued by Office of the Auditor General, Nepal in 2015; Financial Procedural Act and Rules of GON and GON Accounting Guideline 2016 issued by FCGO. 3. Basic of Accounting The project has maintained accounts according to the Government of Nepal Accounting policies on a cash basis of accounting and double entry accounting systems. 4. Fund Flow mechanism After the annual budget is approved by the parliament, MOF issues authorization letter to the Ministry of Energy, Water Resource & irrigation (MoEWRI). MOPE then issues authorization letter to the Executive Director of AEPC to spend budget. GON fund and reimbursable fund is released by District Treasury and Controller Office as per Treasury Single Account System (TSA) as per approved annual program and budget breakdown. AEPC is solely responsible for all payments. AEPC prepares withdrawal applications and sends to IDA for reimbursement and replenishment. 5. Designated Account Separate Designated Account (in USID) have been established. Designated Account is operated with the joint signatories of the Executive Director and Chief of Account Section of AEPC. Separate ledgers have been maintained at AEPC for day to day financial transactions for both Accounts. It is used to transfer the amount to the GON central account for reimbursement purpose. 6. Sources and Uses of Fund Project Financial Statement (Main sheet) reflects the figures as Source and Uses of Fund. GON fund, GON reimbursable fund, Donor's grant, and Donor fund replenishable amount are the main sources of the project. Category wise total expenditure are shown in the Uses. The expenses made under different category have been reclassified from Interim Financial Monitoring Report as per actual nature of expenditure. 7. Cumulative up to the Previous FY and current FY Cumulative up to Previous FY is shown for cumulative purpose and consists of cumulative amount at the end of previous year from inception of the project. Similarly, cumulative up to the current FY is derived by adding cumulative up to previous year and current year's data. 8. Advances Advances are treated as expenditure. Unsettled advances at the end FY is NPR 523,540 only. 9. Exchange Rate Applicable Buying rate (exchange rate) as per Nepal Rastra Bank is applied for the unspent balance (USD) in the Designated account at the end date of FY to convert it in Nepalese rupees. 10. Nepalese Fiscal Year FY 2017/18 commenced from 16 July 2017 and ended on 16 July 2018. The figures mentioned in this Project Financial Statement are within this reporting period. 11. Reporting currency The reporting currency is in Nepalese Rupees- NPR (currency of Nepal). The amount disbursed from IDA Grant are separately shown in Report-5 of Project Financial Statements. 12. Intended Purpose IDA Grants have been used only for the intended purpose of the project. 13. Date of Authorization These project financial statements have been authorized for issue by the Alternative Energy Promotion Center, Lalitpur on 15 December 2018. Sushrut Dhakal Yub Raj Acharya Nawa Raj Dhakal Financial Management Expert Chief Account Controller Act. Executive Director