GrantThornton a * Financial Statements and . Independent Auditors' Report Da Nang - Quang Ngai Expressway Development Project * (Component 1 and 2A funded by World Bank - Financing Agreements No. 4942-VN, No. 4941-VN and Loan Agreement No. 8049-VN) F For the period from 1 January 2018 to 28 February 2019 Da Nang - Quang Ngai Expressway Development Project (Component 1 and 2A funded by the World Bank - Financing Agreements No. 4942-VN, No.4941-VN and Loan Agreement No. 8049-VN) U U * Contents U U Page Part I - Financial Statements 1 Report of the Project Owner 2 Independent Auditors' Report 4 Statement of Sources and Uses of funds 6 Statement of Fund balance 7 Statement of Designated account 8 1 Statement of Loan withdrawals 9 Notes to the financial statements 10 Part II - Auditors' Report on the Internal control 19 Part Ill- Auditors' Report on the Compliance 22 U U U U U U U U U U 8 Da Nang - Quang Ngai Expressway Development Project 8 (Component 1 and 2A funded by the World BanK - Financing Agreements No. 4942-VN, No. 4941-VN and Loan Agreement No. 8049-VN) U I S U U U S U U * Part I I * Financial Statements U I U U S U U S U U 1/ I) U Da Nang - Quang Ngai Expressway Development Project (Component 1 and 2A funded by the World Bank - Fnancing Agreements No. 4942-VN, No. 4941-VN and Loan Agreement No. 8049-VN) U a Report of the Project Owner U U Vietnam Expressway Corporation (hereinafter called "VEC" or "the Project Owner") submits its report together with the audited financial statements of the Da Nang - Quang Ngai Expressway Development Project (Component 1 and 2A funded by World Bank - Financing Agreements No. 4942-VN, No. 4941 -VN and Loan Agreement No. 8049-VN) ("the Project") for the period from 1 January 2018 to 28 February 2019. Auditors The financial statements for the period from 1 January 2018 to 28 February 2019 have been audited by Grant Thornton (Vietnam) Limited. U The Project Owner The members of the Board of Management of Vietnam Expressway Corporation managing the Project's activities during the period and to the date of the report are: Name Position Mr Tran Van Tam General Director Mr Nguyen The Cuong Deputy General Director Mr Nguyen Manh Hung Deputy General Director Mr Nguyen Quoc Binh Deputy General Director Mr Le Quang Hao Deputy General Director Mr Nguyen Van Nhi Deputy General Director Statement of the Project Owner The Project Owner is responsible for preparing Financial Statements for the period from 1 January 2018 to 28 February 2019 ("the period") which give a true and fair view of: * the financial position of the Project; * the funds received and expended for the period; * the activities of the designated account for the period and the balance of this account as at 28 February 2019; and * the funds withdrawn for the year. In preparing those Financial Statements, the Project Owner is required to: * select suitable accounting policies and then apply them consistently in accordance with the Financial Agreements No.4942-VN, No.4941-VN between Socialist Republic of Vietnam and International Development Association ("IDA"), and Loan Agreement No.8049-VN between the Socialist Republic of Vietnam and the International Bank for Reconstruction and Development (IBRD) and the Project Administration Manual; * make judgements and estimates that are reasonable and prudent; * state whether applicable accounting principles have been followed, subject to any material departures disclosed and explained in the financial statements; and * design and implement an effective internal control system for the purpose of properly preparing and presenting the financial statements so as to minimise errors and frauds. The Project Owner confirms that they have complied with the above requirements in preparing the Financial Statements. 8 2 U Da Nang - Quang Ngai Expressway Development Project (Component 1 and 2A funded by the World Bank - Financing Agreements No 4942-VN. No. 4941-VN and Loan Agreement No. 8049-VN) U The Project Owner is responsible for ensuring that proper accounting records are kept which disclose, with reasonable accuracy at any time, the financial position of the Project and to ensure that the accounting records comply with the accounting system as described in the Project Implementation Manual. They are also responsible for safeguarding the assets of the Project and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Approval of the financial statements We hereby approve the accompanying financial statements on pages 6 to 18 which give a true and fair view of the fund balance of the Da Nang-Quang Ngai Expressway Development Project (Component 1 and 2A funded by the World Bank-Financing Agreement No.4942- VN, 4941-VN and Loan Agreement No.8049- VN) as at 28 February 2019, the movement and balance of the designated account for the Credit fund as at 28 February 2019 and the funds received and disbursed during the period from 1 January 2018 to 28 February 2019, in accordance with the accounting policies as described in Note 2 to the financial statements and in the opinion of the Project Owner, the loan withdrawals have been adequately reconciled to the statements of expenditure during the period, and such statements of expenditures were adequately supported. Oh behaif of the Project Owner, aGenerai irector Vietnam Expressway Corporation Hanoi, Vietnam 28 June 2019 a U U a U * 3 U 8/ U U a a*0 GrantThornton a U a Independent Auditors' Report on the financial statements of the Da Nang - Quang Ngai Expressway Development Project Grant Thornton (Vietnam) Limited (Component 1 and 2A funded by World Bank - 18" Floor Financing Agreements No. 4942-VN, No. 4941-VN and Hoa Binh International Office Building Loan Agreement No. 8049-VN) 106 Hoang Quoc Viet Street Cau Giay District, Hanoi for the period from 1 January 2018 to 28 February 2019 Vietnam T +84 24 3850 1686 F +84 24 3850 1688 No.16-11-237-2018-DNQN-1 To: Vietnam Expressway Corporation International Development Association International Bank for Reconstruction and Development I Auditors' opinion We have audited the accompanying financial statements of the Da Nang - Quang Ngai Expressway Development Project (Component 1 and 2A funded by World Bank - Financing Agreements No. 4942-VN, No. 4941-VN and Loan Agreement No. 8049-VN) ("the Project") for the period from 1 January 2018 to 28 February 2019, prepared on 28 fJune 2019, including the Statement of Fund balance as at 28 February 2019, the Summary of Sources and Uses of funds, the Statement of Designated account, the Statement of Loan withdrawals for the period from 1 January 2018 to 28 February 2019, and a summary of significant accounting policies and other explanatory notes as presented on pages 6 to 18. In our opinion, in all material respects: * The accompanying financial statements give a true and fair view of the funds received and expenditures of the Project for the period from 1 January 2018 to 28 February 2019 in conformity with the accounting policies described in Note 2 of the Notes to the financial statements; * The accompanying statement of designated account give a true and fair view of the balance of the designated account as at 28 February 2019 and the Project's receipts and disbursements via this designated account for the period from 1 January 2018 to 28 February 2019 in conformity with the relevant covenants of the Components 1 and 2A funded by the World Bank under Financing Agreements No. 4942- VN, No. 4941-VN and Loan Agreement No. 8049-VN, the Project Implementation Manual and relevant regulations established by the World Bank; and * Withdrawal Applications were adequately reconciled to the statements of expenditures ("SOEs") prepared by the Project Owner for the period from 1 January 2018 to 28 February 2019 and those SOEs were adequately supported by accounting vouchers. U Basis for auditors' opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's 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 in Vietnam, 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. Grant Thornton (Vietnam) Limited grantthornton.com.mn Company code and tax: 0101476557. Registered in Vietnam U Other matter As presented in Note 2 - Principal accounting policies - Basis of preparation of the financial statements, the accompanying financial statements are prepared for the Components 1 and 2A funded by the World Bank under Financing Agreements No. 4942-VN, No. 4941-VN and Loan Agreement No. 8049-VN. These financial statements together with our auditors' report do not cover the activities of other components funded by Japan International Cooperation Agency and implemented by other Project Management Units within the Ministry of Transport. Responsibility of the Project Owner for the financial statements The Project Owner is responsible for the preparation and fair presentation of these financial statements in accordance with 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. Auditors' responsibility Our objectives are to obtain reasonable assurance about whether the financial statements of the Project as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's 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 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; * Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances; and * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Project Owner. We communicate with the Project Owner, 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. GRANT THORNTON (VIETNAM) LIMITED Nguyen Hong Ha Bui Tran Phuong Minh CPA Vietnam Practising Certificate CPA Vietnam Practising Certificate Noi 1710-2018-068-, No: 2595-2018-068-1 Deputy General Director Auditor Hanoi, Vietnam 28 June 2019 - Da Nang - Quang Nga; xpressway Develooent Project (Component 1 and 2A funded by the World Bank - Finanang Agreements No. 4942-VN No. 4941-VN and Loan Agreement No. 8049-VN) Statement of Sources and Uses of funds for the period from 1 January 2018 to 28 February 2019 Period from 1 January 2018 Accumulated to Note to 28 February 2019 28 February 2019 USD VND USD VND Sources of funds Credit fund - IDA 3 18,749,504.10 436,683,683,562 119,750,702,39 2,600,138,882,057 Credit fund - IBRD 3 41,319,637.14 942,585,812,060 141,160,527,53 3,181,767,176,855 Counterpart fund - Land Clearance 4 1,370,162.87 31,746,673,776 64,403,547,91 1,393,377,766,419 Counterpart fund - VEC (44,088.78) (1,021,537,089) 2,580,475,09 55,211,059,292 Other funds 143,083.01 3,315,233,295 655,677,77 22,251,670,615 61,538,298.34 1,413,309,865,604 328,550,930,69 7,252,746,555,238 Uses of funds Component 1 5 Constructions 68,015,605.39 1,575,921,576,830 212,787,936,26 4,856,028,162,704 Consultants 3,740,723.82 86,672,571,014 17,872,180,33 403,718,258,915 Relocation of power lines 164,053.32 3,801,115,500 3,260,360.34 74,184,035,719 Land Clearance and Resettlement 1,340,895.57 31,068,550,289 57,129.133,14 1,240,387,919,389 Bomb clearance - - 1,488,436.66 31,113,959,500 Audit fee 19,385.07 449,152,000 105,882,65 2,333,774,150 Component 2(a) - Project Management (24,122.06) (558,908,138) 1,344,357,71 29,591,716,135 Loan interest, commitment fee - IDA 749,504.10 17,103,683,562 4,381,129,94 98,463,167,410 Loan interest, commitment fee - IRD 1,125,041.66 25,673,450,681 3,903,450,82 86,490,033,703 75,131,086.87 1,740,131,191,738 302,272,867,85 6,822,311,027,625 Foreign exchange difference (1,225,768.43) (7,700,785.01) (Deficit)/Surplus (14,818,556.96) (326,821,326,134) 18,577,277.83 430,435,527,613 4anoi, Vietnam 28 Jure 2019 Tran Van Tam Vu Quoc Khanh Poject Director Deputy Director of Finance and Accounting department Uo e ' " Da Nang - Quang Ngai Expressway Dev -pment Project (Component 1 and 2A funded by the World Bank - Financing Agreements No. 4942-VN No. 4941-VN and Loan Agreement No. 8049-VN) 8 8 * Statement of Fund balance as at 28 February 2019 U 8 Notes 28 February 2019 31 December 2017 USD VND USD VND Fund balance, beginning of the year 33,395,834.79 757,256,853,748 50,144,186.12 1,128,673,281,162 Deficit of uses of sources over receipts (14,818,556.96) (326,821,326,134) (16,748,351.33) (371,416,427,414) Fund balance, end of the year 18,577,277.83 430,435,527,614 33,395,834.79 757,256,853,748 Represented by: Assets Cash (Foreign currency - USD) 6 2,635,561.42 61,065,958,101 3,811,934.22 86,441,908,300 Advances to land clearance implementing units 4 3,332,255.73 77,208,365,333 3,401,504.91 77,129,123,816 Advances to contractors 7 2,983,728.27 69,132,984,026 17,337,658.90 393,131,415,621 Value added taxes to be reclaimed 21,490,815.80 497,942,202,394 16,121,669.33 365,558,852,072 Other receivables 1,726.37 40,000,000 1,764.06 40,000,000 30,444,087.59 705,389,509,854 40,674,531.42 922,301,299,809 Liabilities Payables to contractors 8 11,074,192.75 256,589,046,022 6,444,127.97 146,120,601,705 Payables to VEC - Project management fee 792,617.01 18,364,936,218 834,568.66 18,923,844,356 11,866,809.76 274,953,982,240 7,278,696.63 165,044,446,061 18,577,277.83 430,435,527,614 33,395,834.79 757,256,853,748 Hanoi, Vietnam 28 June 2019 Tran Van Tam Vu Quoc Khanh Project Director Deputy Director of Finance and Accounting department T a Seto1j,'Cln a ;` tq rl P -es= na n --' I U Da Nang - Quang Ngai Expressway Development Project (Component 1 and 2A funded by the World Bank - Financing Agreements No 4942-VN. No. 4941-VN and Loan Agreement No. 8049-VN) U Statement of Designated account For the period: For the period from 1 January 2018 to 28 February 2019 Account number 011 0137.000230.2 Bank Maritime Commercial Joint Stock Bank Address Building A, Sky Tower, No 88 Lang Ha, Dong Da, Ha Noi Credit Agreement 4942-VN, 4941-VN and 8049-VN Currency USD Period from 1 January 2018 to 28 February 2019 USD Part A- Account activity Beginning balance as at 1 January 2018 3,811,934.22 Add: Amounts replenished by World Bank to designated accounts 58,194,595.48 Interests from designated accounts (deducted by Bank charge) - net (880.00) Less: Amount withdrawn from Designated Account (59,370,088.28) Ending balance as at 28 February 2019 2,635,561.42 Part B: Account reconciliation Advances from World Bank as at 1 January 2018 18,000,000.00 Add: Additional advances during the period 18,000,000.00 Less: Amount recovered by World Bank (18,000,000.00) Total advances to designated account as at 28 December 2019 18,000,000.00 Balance of designated account as at 28 February 2019 2,635,561.42 Add: Amount paid but not yet claimed (Note 10) 9,917,880.23 Amount claimed but not yet disbursed by World Bank (Note 10) 5,446,948.16 Less: Interests from designated accounts (deducted by Bank charge) (389.81) Total advances to designated account as at 28 February 2019 18,000,000.00 Hanoi, Vietnam 28 JuTie 2019 Tran Van Tam Vu Quoc Khanh Project Director Deputy Director of Finance and Accounting department U UThenoes set out on8pages from 1n 'o 18 an Integra ao these fnnc s tens 8 o . � v � �I � � � � � о о о о о о . у сыi ° °о °о °' � с о о � > � � � °о °о °о � й � � и � п н о о rn о со г� с� v v з ы со о �- и и ш м и н со� о у `п о � �ri со oi г� rn о о м г� д г� о м Г г. 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Q ш л1 С у р о о � о о о о о о и �s х а W Q ., г с\ с� � с� с` с` с� н cv с и � �� � 0 w о� � о о о о о� с п�"э с ° у,� вз Q rn й р О с0 й г о � Z �, � � г О М � С � � � � о � т � VJ � � с ш � ° � � � � � о � � rn ы � с с `� С� �� f2 � С Q са ы г й ш р j,' `� 1- `ai Г`1V� > � J " 1 � � и � I ш � 3 о сСЛ о> .3 � � ° � � -� � [� � z� �F� +�-+ п � S1 С S] О_ ы � N N�' N N N ° р� ` � Ф_ Q �" �%� � -' а � с с�ъ Q й о О О Q О О О о � � т �� °� � о � �/ � � а г i� с� ° � � vэ сп с� и сл и и- *� � сч �- �- ~ � � ■ Da Nang - Quang Ngai Expressway Development Project (Component I and 2A funded by the World Bank - Financing Agreements No. 4942-VN No. 49AI-VN and Loan Agreement No. 8049-VN) N0%tUr%s We% the finar%ciell steateirr%ents for the period from 1 January 2018 to 28 February 2019 1 The Project background Da Nang - Quang Ngai Expressway Development Project operates under the following agreements: " Loan Agreement No. VN 1 O-P8 dated 15 June 2011 signed between the Socialist Republic of Vietnam and the Japan International Cooperation Agency (JICA); " Financing Agreements No. 4942-VN and No. 4941-VN dated 12 January 2012 signed between the Socialist Republic of Vietnam and the International Development Association (IDA); and 0 Loan Agreement No. 8049-VN dated 12 January 2012 signed between the Socialist Republic of Vietnam and the International Bank for Reconstruction and Development (IBRD). The loans from IDA and IBRD are implemented through the World Bank ("WB"). In accordance with mutual agreement between donors, the construction from Da Nang province to Tam Ky city in Quang Nam province is funded by JICA and the construction from Tam Ky city to Quang Ngai province is funded by the World Bank. The objectives of the Project are to construct an expressway that will enhance efficiency and safety for road users travelling between Da Nang city and Quang Ngai province and build institutional capacity for expressway development in the Ministry of Transport. According to Decision No. 220/QD-BGTVT issued by the Ministry of Transport dated 22 January 2010, Vietnam Expressway Corporation (VEC) is the Project Owner for Component 1 and 2A of the Da Nang - Quang Ngai Expressway Development Project. According to the Decision No. 1903/QD-BGTVT dated 13 August 2012 and the Aide Memoire of the World Bank from 15 October 2012 to 13 November 2012, the Directorate for Roads of Vietnam is appointed as the Project Owner and Project Management Unit 1 (PMU1) is appointed as Agency of implementing and contract management for the Component 2B - "Building capacity and support for expressway network planning and management". For the Component 1 and 2A, according to Decision No. 3470/QD-BGTVT dated 2 December 2010 issued by the Ministry of Transport on the coordination mechanism in implementing the Da Nang - Quang Ngai Expressway Development Project and Decision No. 3681 /QD -BGTVT dated 29 December 2010 on sub-projects for land clearance and resettlement and appointing local authorities as sub-project managements, VEC is the Project Owner and the implementing units of the Project are as follows: TO 0 Project Management Unit I ("PMU 1 ") is a management consultant for the components funded by World Bank ("WB") under the management contract signed with the Project Owner; 0 Provincial Implementing Units for Land Acquisition and Resettlement are as below: " Da Nang city: the People's Committee of Da Nang City authorised Da Nang Land clearance and compensation Agency Unit No. 2 to implement activities of sub-project. " Quang Nam Province: the People's Committee of Quang Nam Province authorize local agencies to implement the land acquisition and resettlement subprojects in Quang Nam province. Locally, District People's Committee authorised the local Land Development Centers in Dien Ban district; Que Son district; Duy Xuyen district; Thang Binh district; Phu Ninh district; Nui Thanh district; and Tam Ky city to be the implementing units. " Quang Ngai Province: the People's Committee of Quang Ngai Province authorize Quang Ngai Department of Transport and Quang Ngai Land clearance Sub-project Management Unit to be the implementing unit. 10 Da Nang - Quang Ngai Expressway Development Project (Component 1 and 2A funded by the World Bank - Financing Agreements No. 4942-VN, No. 4941-VN and Loan Agreement No. 8049-VN) The Project consists of two components as follows: Component 1: Da Nang - Quang Ngai Expressway a) Construction of a four-lane expressway from National Highway 1A, to the south of Da Nang province, to Quang Ngai province, including construction of a main carriageway, bridges, viaducts, and culverts, a tunnel, connection and service roads, and intersections, and related maintenance and rehabilitation of the local road network, in two parts: (i) from Da Nang province to Tam Ky city in Quang Nam province; and (ii) from Tam Ky city to Quang Ngai province. b) Construction of a two-lane highway, including bridges, from the southern end of such expressway to National Highway 1A, in Quang Ngai province. c) Compensation, resettlement, and rehabilitation, including livelihood restoration, of Project Affected Persons. d) Establishment of an integrated traffic management and toll collection facilities system, and design, installation, and commissioning of an intelligent transport system for the operation, management, and maintenance of such expressway. I Component 2: Project Implementation Support and Institutional Strengthening a) Provision of technical assistance to the Vietnam Expressway Corporation (VEC) in relation to (i) Project implementation, including: (A) construction supervision; (B) integrated review and monitoring; (C) financial auditing; and (D) implementation of the Governance, Transparency, and Anti-Corruption Plan; and (ii) capacity building for financial management. b) Capacity building of: (i) and provision of policy support to the Ministry of Transport in relation to: (A) expressway planning and network management, including establishment and operationalization of an expressway planning and network management entity; and (B) operationalization of said Ministry's public- private partnerships cell; and (ii) the Inspectorate Department in relation to its mandate of governance and anti-corruption. 8 The Project commenced on the effective date of the Agreements and is expected to be completed by 31 October 2018. Under the Financing Agreements, total fund committed for the project is USD1,403.61 million, in which fund committed by the International Development Association is USD143.01 million and by the International Bank of Reconstruction and Development is USD470.49 million. The financing ratios by each donor are as follows: Category JICA IDA & IBRD Counterpart fund % % % Component 1: Da Nang - Quang Ngai Expressway (1) Civil Works: Da Nang - Tam Ky 99.7% 0.3% (2) Civil Works: Tam Ky - Quang Ngai 100% (3) ITS and O&M Equipment 99.7% 0.3% (4) Land Acquisition and Resettlement 100% Component 2: Project Implementation Support and Institutional Strengthening Component 2(a): Project Implementation Support for VEC (1) Construction Supervision: Da Nang - Tam Ky 100% (2) Construction Supervision: Tam Ky - Quang Ngai 100% (3) Integrated Project Review and Monitoring Services 100% (4) Financial Audit 100% (5) Financial Capacity Building for VEC 100% (6) Training, Workshops, and Implementation of GTAP 100% (7) Project Management 100% Component 2(b): Institutional Strengthening for MoT 100% U Da Nang - Quang Ngai Expressway Development Project (Component 1 and 2A funded by the World Bank - Financing Agreements No. 4942-VN, No. 4941-VN and Loan Agreement No. 8049-VN) U 2. Principle accounting policies 2.1 Basis of preparation of the financial statements The financial statements are prepared for the Project operations of Components 1 and 2A funded by the World Bank under Financing Agreements No. 4942-VN, No. 4941-VN and Loan Agreement No. 8049-VN, implemented by VEC, the Provincial Implementing Units including Project Management Unit 1, Land Development Center in Tam Ky city, Land Development Center in Nui Thanh district and Sub-project Management Unit for Land clearance and resettlement in Quang Ngai (hereinafter called "the Implementing Units"). Therefore they only present income, expenditures, fund balance, loan withdrawals, the designated accounts for these components. The financial statements do not cover the components funded by Japan International Cooperation Agency and implemented by other Project Management units of the Ministry of Transport. 2.2 Basis of accounting The financial statements are prepared in accordance with the World Bank's financial reporting requirements, the requirements of the above mentioned Agreements and the following accounting principles. The financial statements are prepared under the historical cost convention and on a modified cash basis of accounting. Accordingly, receipts are recognised when received rather than when the right to receive them arises, and expenditures are recognised when incurred. 2.3 Reporting currencies The accounting records of the Project are maintained in Vietnamese Dong ("VND"). The financial statements are prepared in Vietnamese Dong except for the statement of designated account and the statement of loan withdrawals, which are prepared in the original currency of United States Dollars ("USD") and Special Drawing Rights ("XDR") as required by the World Bank. USD equivalents of the amounts on these statements are also presented for information and reconciliation purpose using the buying exchange rate of Maritime bank at 28 February 2019 of 1USD = 23,170 VND (2017: 1USD =22,675VND). Exchange differences are presented in the Summary of sources and uses of funds. 2.4 Accounting period The Project's accounting period is from 1 January to 31 December. The current accounting period is from 1 January 2018 to 28 February 2019 as set out in the Term of Reference of the Contract No. 03/HDTV-VEC/2017 dated 10 February 2017. 2.5 Compensation for land clearance and other related costs Compensation for land clearance and other related costs is recognised as expenses when the payments are approved by the provincial State Treasury and paid to the impacted persons. 2.6 General administration expenses Project administration expenses are recognised based on the allocation among projects implemented by VEC as approved by the Board of Members of VEC. 2.7 Front-end fee of IBRD loan Front-end fee of 0.25% of funds received from IBRD which is USD470.49 million is recorded after the signing date of the Loan Agreement at the receipt of the Bank' Notice. U 2.8 Commitment charge of IDA loan Maximum commitment charge of IDA loan is equal to 0.5% per year on the undrawn fund balance and is recognised annually at the receipt of the Bank's Notice. * 12 U Da Nang - Quang Ngai Expressway Development Project (Component 1 and 2A funded by the World Bank - Financing Agreements No 4942-VN. No 4941-VN and Loan Agreement No. 8049-VN) I 2.9 Service charge of IDA loan Service charge is calculated based on the rate of 0.75% on the drawn amounts and is recognised annually at the receipt of the Bank's Notice. 2.10 Interest Interest of IBRD loan is calculated based on the loan balance and the reference rate plus a margin determined by the Loan Agreement. Interest of IDA loan is calculated based on the drawdown balance at the rate of 3.2% per year and is recognised at the receipt of the Bank's Notice. 3. IDA/IBRD fund Period from 1 January 2018 Accumulated to to 28 February 2019 28 February 2019 USD VND USD VND IDA fund Advanced to designated account 18,000,000.00 419,580,000,000 Disbursements received - - 115,369,572.45 2,501,675,714,647 Loan interests 749,504.10 17,103,683,562 4,381,129.94 98,463,167,410 18,749,504.10 436,683,683,562 119,750,702.39 2,600,138,882,057 IBRD fund Advanced to designated account - - 18,000,000.00 400,860,000,000 Disbursements received 40,194,595.48 916,912,361,379 119,257,076.71 2,694,417,143,152 Loan interests 1,125,041.66 25,673,450,681 3,903,450.82 86,490,033,703 41,319,637.14 942,585,812,060 141,160,527.53 3,181,767,176,855 60,069,141.24 1,379,269,495,622 260,911,229.92 5,781,906,058,912 .1 wo NOUUW ESUWEEEWE now ENNO WEN Wam Da Nang - Quang Ngai Expressway Development Project (Component 1 and 2A funded by the World Bank - Financing Agreements No. 4942-VN, No. 4941-VN and Loan Agreement No. 8049-VN) 4. Counterpart fund Details of the counterpart fund provided for the period from 1 January 2018 to 28 February 2019 are as follows: For the period from 1 January 2018 to 28 December 2019 Balance of Advances Payment Balance of advances Advances Payment advances as at accumulated to accumulated to 28 as at 1 January 2018 during the year during the year 28 February 2019 28 February 2019 February 2019 VND VND VND VND VND VND Counterpart fund - VEC - - - 78,057,757,079 78,057,757,079 Counterpart fund - Provincial Implementing Units Land Fund Development Center in Nui Thanh 11,772,079,402 13,161,758,800 11,528,155,941 13,405,682,261 300,319,925,101 196,574,248,798 Land Fund Development Center in Tam Ky city 33,611,464,192 - - 33,611,464,192 93,460,788,000 52,849,323,808 Subproject Management Unit for Land clearance and resettlement in Quang Ngai 9,392,770,363 15,868,484,304 17,550,180,780 7,711,073,887 851,025,179,304 893,157,410,417 Land Fund Development Center in Quang Nam 326,617,558 170,572,352 471,183,315 26,006,595 43,858,299,655 25,741,500,405 Ky Ha Chu Lai Quang Nam Development and Investment One Member Company Limited 22,026,192,301 2,545,858,320 2,117,912,223 22,454,138,398 104,713,574,359 72,065,435,961 77,129,123,816 31,746,673,776 31,667,432,259 77,208,365,333 1,393,377,766,419 1,240,387,919,389 77,129,123,816 31,746,673,776 31,667,432,259 77,208,365,333 1,471,435,523,498 1,318,445,676,468 14 Kaekaawormaakmmaammemeaaas aam ee mKe Da Nang - Quang Ngai Expressway Development Project (Component 1 and 2A funded by the World Bank - Financing Agreements No. 4942-VN, No. 4941-VN and Loan Agreement No. 8049-VN) 5. Expenditure by activities and by sources of fund for the period from 1 January 2018 to 28 February 2019 For the period from 1 January 2018 to 28 February 2019 Accumulated to 28 February 2019 Category IDA IBRD Counterpart fund Total IDA IBRD Counterpart fund Total VND VND VND VND VND VND VND VND Component 1 - 1,660,319,342,053 37,593,623,580 1,697,912,965,633 796,115,948,739 4,457,439,577,819 1,354,210,583,819 6,607,766,110,377 Constructions - 1,575,921,576,830 - 1,575,921,576,830 682,680,966,169 4,173,347,196,535 - 4,856,028,162,704 Consultants - 83,948,613,223 2,723,957,791 86,672,571,014 111,950,360,420 283,643,229,284 8,124,669,211 403,718,258,915 Relocation of power lines - 3,801,115,500 3,801,115,500 - - 74,184,035,719 74,184,035,719 Land Clearance and Resettlement - - 31,068,550,289 31,068,550,289 - - 1,240,387,919,389 1,240,387,919,389 Bomb clearance - - - - 31,113,959,500 31,113,959,500 Audit fee - 449,152,000 - 449,152,000 1,484,622,150 449,152,000 400,000,000 2,333,774,150 Component 2(a) 17,103,683,562 25,673,450,681 (558,908,138) 42,218,226,105 98,463,167,410 86,490,033,703 29,591,716,135 214,544,917,248 Project Management - (558,908,138) (558,908,138) - - 29,591,716,135 29,591,716,135 Front-end fees, commitment and service charges 17,103,683,562 25,673,450,681 - 42,777,134,243 98,463,167,410 86,490,033,703 - 184,953,201,113 17,103,683,562 1,685,992,792,734 37,034,715,442 1,740,131,191,738 894,579,116,149 4,543,929,611,522 1,383,802,299,954 6,822,311,027,625 For the period from 1 January 2018 to 28 February 2019 Accumulated to 28 February 2019 Category IDA IBRD Counterpart fund Total IDA IBRD Counterpart fund Total USD USD USD USD USD USD USD USD Component 1 - 71,658,150.28 1,622,512.89 73,280,663.17 35,560,918.74 194,831,268.66 62,251,741.98 292,643,929.38 Constructions - 68,015,605.39 - 68,015,605.39 30,396,720.15 182,391,216.11 - 212,787,936.26 Consultants - 3,623,159.82 117,564.00 3,740,723.82 5,095,298.90 12,420,667.48 356,213.95 17,872,180.33 Relocation of power lines - - 164,053.32 164,053.32 - - 3,260,360.34 3,260,360.34 Land Clearance and Resettlement - - 1,340,895.57 1,340,895.57 - - 57,129,133.14 57,129,133.14 Bomb clearance - - - - - 1,488,436.66 1,488,436.C6 Audit fee - 19,385.07 - 19,385.07 68,899.69 19,385.07 17,597.89 105,882.65 Component 2(a) 749,504.10 1,125,041.66 (24,122.06) 1,850,423.70 4,381,129.94 4,198,172.73 1,049,635.80 9,628,938.47 Project Management - - (24,122.06) (24,122.06) - 294,721.91 1,049,635.80 1,344,357.71 Front-end fees, commitment and service charges 749,504.10 1,125,041.66 - 1,874,545.76 4,381,129.94 3,903,450.82 - 8,284,580.76 749,504.10 72,783,191.94 1,598,390.83 75,131,086.87 39,942,048.68 199,029,441.39 63,301,377.78 302,272,867.85 15 *mmmWWmmmmmWWWWWWWWasmafteamagmaa Da Nang - Quang Ngai Expressway Development Project (Component 1 and 2A funded by the World Bank - Financing Agreements No. 4942-VN, No. 4941 -VN and Loan Agreement No. 8049-VN) 6. Cash at bank 28 February2019 31 December 2017 USD Equivalent VND USD Equivalent VND Designated account 2,635,561.42 61,065,958,101 3,811,934.22 86,441,908,300 2,635,561.42 61,065,958,101 3,811,934.22 86,441,908,300 7. Advances to contractors 28 February 2019 31 December 2017 USD VND VND Equivalent USD VND VND Equivalent LOTTE E&C - 10,331.79 1,170,332,487 1,350,793,480 POSCO Engineering and Construction Co Ltd - 388,926.05 22,147,677,418 30,361,894,318 Shandong Luqiao Group Co Ltd - 2,053,941.68 72,838,823,156 114,357,226,629 Jiangsu Provincial Transportation Engineering - - 104,602,542,306 104,602,542,306 Construction Corporation 1 - Ministry of Construction - - 116,385,293,738 116,385,293,738 Joint venture between Viet Vuong JSC and Vietnam Construction Import and Export - 64,672,006,259 64,672,006,259 - 20,866,508,099 20,866,508,099 PricewaterhouseCoopers Vietnam Company - - - 1,605,738,612 1,605,738,612 Electronic Construction No 4 Co Ltd - 169,876,084 169,876,084 - 169,876,084 169,876,084 Design Survey and Construction Joint Stock Company - 505,226,642 505,226,642 - 505,226,642 505,226,642 Da Nang Acceptance Council - 250,000,000 250,000,000 - 250,000,000 250,000,000 Yen Lac Co Ltd - 1,291,437,840 1,291,437,840 - 1,291,437,840 1,291,437,840 National Power Transmission No 2 Corporation - - 294,545,945 294,545,945 Investment Consulting and Construction Verification JSC - - 504,536,355 504,536,355 Technical World Co., Ltd - - - 561,358,372 561,358,372 Song Da No 11 JSC - 24,437,201 24,437,201 - 24,437,201 24,437,201 UHY Auditing and Consulting Company Limited - 1,221,000,000 1,221,000,000 - - . AASC Auditing Firm Company Limited - 999,000,000 999,000,000 - - 69,132,984,026 69,132,984,026 2,453,199.52 343,218,334,255 393,131,415,621 16 WwmmmmmmWWmmwmWWwneW sWWowWssWWw Da Nang - Quang Ngai Expressway Development Project (Component 1 and 2A funded by the World Bank - Financing Agreements No. 4942-VN, No. 4941-VN and Loan Agreement No. 8049-VN) 8. Payables to contractors 28 February 2019 31 December 2017 USD VND VND Equivalent USD VND VND Equivalent DOHWA Engineering - 482,196,558 482,196,558 75,748.55 (309,024,717) 1,413,876,053 LOTTE E&C 369,727.93 42,213,422,017 50,632,472,677 215,214.11 21,205,286,128 26,100,331,060 POSCO Engineering and Construction Co Ltd 532,770.63 34,090,030,283 46,482,275,137 510,010.17 30,701,492,792 42,301,674,107 Shandong Luqiao Group Co Ltd - 66,986,540,275 66,986,540,275 183,626.26 14,138,792,428 18,315,371,714 Jiangsu Provincial Transportation Engineering - 50,163,806,320 50,163,806,320 - 27,117,748,539 27,117,748,539 Construction Corporation 1 - Ministry of Construction - 34,953,643,478 34,953,643,478 - 8,960,729,995 8,960,729,995 Joint venture between Viet Vuong JSC and Vietnam Construction Import and Export -- - - 10,381,386,024 10,381,386,024 PricewaterhouseCoopers Vietnam Company - - - - 4,817,215,838 4,817,215,838 PMU1 - 131,702,472 131,702,472 - 131,702,472 131,702,472 Huu Nghi Nam Lao Co Ltd - 555,942,800 555,942,800 - 555,942,800 555,942,800 Company of Economic Cooperation- Military Region 4 - 1,638,950,700 1,638,950,700 - 1,638,950,700 1,638,950,700 319 One Member Company Limited - 448,378,000 448,378,000 - 448,378,000 448,378,000 Mine action and Environment Centre- 5 Area - 526,462,300 526,462,300 - 526,462,300 526,462,300 Song Da No 11 JSC - 465,243,100 465,243,100 - 465,243,100 465,243,100 Electronic Construction No 4 Co Ltd - 1,150,274,772 1,150,274,772 - 227,855,767 227,855,767 Power Engineering Consulting No 1 JSC - 9,561,150 9,561,150 - 9,561,150 9,561,150 Geophysical JSC - 393,783,665 393,783,665 - 1,272,538,695 1,272,538,695 Power Construction Joint Stock Company No. 1 - 614,624,747 614,624,747 - 614,624,747 614,624,747 Power Engineering Joint Stock Company - 294,951,630 294,951,630 - 294,951,630 294,951,630 Vietnam Joint Stock Construction Electricity Corporation - 230,550,969 230,550,969 - 230,550,969 230,550,969 Song Da 11- Thang Long JSC - 295,506,045 295,506,046 - 295,506,045 295,506,045 Consulting on traffic safety TV3 - 21,181,248 21,181,248 - - - Investment Consulting and Construction Verification JSC - 110,997,979 110,997,979 - 902,498.56 235,777,750,508 256,589,046,022 984,599.09 123,725,895,402 146,120,601,705 17 U Da Nang - Quang Ngai Expressway Development Project (Component 1 and 2A funded by the World Bank - Financing Agreements No. 4942-VN, No. 4941-VN and Loan Agreement No. 8049-VN) 3 9. Interest of designated account 28 February 2019 USD Equivalent VND Opening balance 1,269.81 23,266,269 Bank charge during the year (880.00) (20,119,000) Closing balance 389.81 3,147,269 10. Amount withdrawn but not yet claimed 28 February 2019 USD SOE 30 for expenditures from 3 October 2018 to 30 November 2018 5,446,948.16 Amount paid but not yet claimed 9,917,880.23 15,364,828.39 11. Approval for issuance of the financial statements The financial statements were authorised and approved by Vietnam Expressway Corporation to issue. 3 Hanoi, Vietnam 28 June 2019 IA Tran Van Tan Vu Quoc Khanh Project Director Deputy Director of Finance and Accounting department I U I I U 8 8 U 5 18 8 I Da Nang - Quang Ngai Expressway Development Project 8 (Component 1 and 2A funded by the World Bank - Financing Agreements No. 4942-VN, No. 4941 -VN and Loan Agreement No. 8049-VN) U 8 8 I U I U U U 8 * PartlI * Auditors' Report * on the Internal Control U I 3 I S I 8 I 8 S I1 a a 1 GrantThornton a Independent Auditors' Report on the Internal Control over financial reporting the Da Nang - Quang Ngai Expressway Development Project Grant Thornton (Vietnam) Limited (Component 1 and 2A funded by World Bank - 18 Floor Hoa Binh International Office Building Financing Agreements No. 4942-VN, No. 4941-VN and 106 Hoang Quoc Viet Street Loan Agreement No.8049-VN) Cau Giay District, Hanoi for the period from 1 January 2018 to 28 February 2019 Vietnam T +84 24 3850 1686 F +84 24 3850 1688 No. 16-11-237-2018-DNQN-2 To: Vietnam Expressway Corporation International Development Association International Bank for Reconstruction and Development Opinion We have audited the accompanying financial statements of the Da Nang - Quang Ngai Expressway Development Project (Component 1 and 2Afunded by World Bank - Financing Agreements No. 4942-VN, No. 4941-VN and Loan Agreement No. 8049-VN) ("the Project") for the period from 1 January 2018 to 28 February 2019, prepared on 28 June 2019, including the Statement of Fund balance as at 28 February 2019, the Summary of Sources and Uses of funds, the Statement of Designated account, the Statement of Loan withdrawals for the period from 1 January 2018 to 28 February 2019, and a summary of significant accounting policies and other explanatory notes, and have issued our report thereon dated 28 June 2019. We conducted our audit in accordance with International Standards on Auditing. As part of the audit of Financial Statements per the Terms of reference, we are required to examine and express opinion on the design and operation of internal control over compliance with requirements that could have a direct and material financial effect on the financial statements as well as over financial reporting. In our opinion, except for the matter as descried in the section 'Basis for qualified auditors'opinion", in all material respects, the Project's internal controls over compliance with requirements that could have a direct and material financial effect on the financial statements as well as over financial reporting were suitably designed throughout the period from 1 January 2018 to 28 February 2019 and the controls tested, which were those necessary to provide reasonable assurance that the control objectives were achieved, operated effectively throughout the period from 1 January 2018 to 28 February 2019. U This report is intended for the information of the Project Owner of the Project and the World Bank. U Basis of qualified opinion U In accordance with the cooperation mechanism between the Project Owner ("Vietnam Expressway Corporation") and land clearance units, land clearance units act as sub-project management units for land clearance under Danang - Quang Ngai Expressway Development Project. This cooperation mechanism does not clearly state the responsibility of the land clearance units to provide the Project Owner with provincial state treasury's reconciliation documents as a basis to recognise the actual land clearance costs incuried by the land clearance units. As a result, the figures of advances and actual payments relating to land clearance and resettlement activities were not recognised and reported on a timely basis. For the purpose of financial audit, we have performed necessary reconciliation and proposed adjustments to ensure that the receipts and disbursements in relation to land clearance activities are fully reflected in the audited financial statements. Grant Thornton (Vietnam) Limited grantthornton.con2 n Company code and tax: 0101476557 Registered in Vietnam. The Project Owner's responsibility The Project Owner is responsible for designing and maintaining effective internal control over compliance with requirements that could have a direct and material financial effect on the financial statements as well as over financial reporting for the purpose of properly preparing and presenting the financial statements so as to minimise errors and frauds; and take responsibility for its assertions as to the effectiveness of such internal control. Auditors' responsibility Our responsibility is to express an opinion on the Project's Financial Statements and on the design and operation of controls over financial reporting, based on our procedures. We conducted our engagement in accordance with the International Standards on Assurance Engagement 3000, "Assurance Engagements other than Audits or Reviews of Historical Financial Information", issued by the International Auditing and Assurance Standards Board. That standard requires that we comply with ethical requirements and plan and perform our procedures to obtain reasonable assurance about whether, in all material respects, the Project's Financial Statements are fairly presented and the controls are suitably designed and operating effectively. An assurance engagement to report on the description, design and operating effectiveness of controls at a project involves performing procedures to obtain evidence about the disclosures in the project's description of its system and design and operating effectiveness of controls. The procedures selected depend on the auditor's judgment, including the assessment of risks that the Project's Financial Statements is not fairly presented, and that controls are not suitably designed or operating effectively. Our procedures included testing the operating effectiveness of those controls that we consider necessary to provide reasonable assurance that the control objectives were achieved. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. GRANT THORNTON (VIETNAM) LIMITED Nguyen Hong Ha Bui Tran Phuong Minh CPA Vietnam Practising Certificate CPA Vietnam Practising Certificate No: 1710-2018-068-1 No: 2595-2018-068-1 Deputy General Director Auditor Hanoi, Vietnam 28 June 2019 * 5 Da Nang - Quang Ngai Expressway Development Project 8 (Component 1 and 2A funded by the Wor!d Bank - Financing Agreements No. 4942-VN, No. 4941-VN and Loan Agreement No. 8049-VN) U IU II I II PatIl II AuiosIeotonteCmlac II II II K 112 II * 0 GrantThornton U Independent Auditors' Report on the Compliance the Da Nang - Quang Ngai Expressway Development Project Grant Thornton (Vietnam) Limited (Component 1 and 2A funded by World Bank - 18th Floor Financing Agreements No. 4942-VN, No. 4941-VN and Hoa n o erna Building Loan Agreement No.8049-VN) Cau Giay District, Hanoi for the period from 1 January 2018 to 28 February 2019 Vietnam T +84 24 3850 1686 F +84 24 3850 1688 U * No. 16-11-237-2018-DNQN-3 To: Vietnam Expressway Corporation g International Development Association International Bank for Reconstruction and Development Opinion We have audited the accompanying financial statements of the Da Nang - Quang Ngai Expressway Development Project (Component 1 and 2Afunded by World Bank - Financing Agreements No. 4942-VN, No. 4941-VN and Loan Agreement No. 8049-VN) ("the Project") for the period from 1 January 2018 to 28 February 2019, prepared on 28 June 2019, including the Statement of Fund balance as at 28 February 2019, the Summary of Sources and Uses of funds, the Statement of Designated account, the Statement of Loan withdrawals for the period from 1 January 2018 to 28 February 2019, and a summary of significant accounting policies and other explanatory notes, and have issued our report thereon dated 28 June 2019. We conducted our audit in accordance with International Standards on Auditing. As part of the audit of Financial Statements per the Terms of reference, we are required to examine and express opinion on the Project's compliance with Applicable Laws, Regulations and the Procurement Procedures and other Provisions of the Financing Agreements and other Guidance from World Bank. In our opinion, the Project was, in all material respects, in compliance with Applicable Laws, Regulations and the Procurement Procedures and other Provisions of the funding agreements, Financing Agreements No. 4942-VN, No. 4941-VN and Loan Agreement No. 8049-VN, and other Guidances from the World Bank that could have a direct and material financial effect on the Project's Financial Statements for the period from 1 January 2018 to 28 February 2019. This report is intended for the information of the Project Owner of the Project and the World Bank. * The Project Owner's responsibility The Project Owner is responsible for complying with Applicable Laws, Regulations and the Procurement Procedures and other Provisions of the Financing Agreements and other Guidances from World Bank. U Auditors' responsibility Our responsibility is to express an opinion on the Project's compliance with the requirements, based on our procedures. We conducted our engagement in accordance with the International Standards on Assurance Engagement 3000, "Assurance Engagements other than Audits or Reviews of Historical Financial Information", issued by the International Auditing and Assurance Standards Board. That standards requires that we comply with ethical requirements and plan and perform our procedures to obtain reasonable assurance about whether, in all material respects, the Project has complied with the requirements. Grant Thornton (Vietnam) Limited grantthornton.cor4'n Company code and tax: 0101476557, Registered in Vietnam. U An assurance engagement to report on the compliance with regulatory and contractual requirements at a project involves performing procedures to obtain evidence about whether the project's activities are free of material non- compliance with the requirements. The procedures selected depend on the auditor's judgment, including the assessment of risks that the Project does not comply with the requirements and whether such non-compliance could have a direct and material effect on the Project's Financial Statements. Our procedures included testing the compliance with the requirements that we consider necessary to provide reasonable assurance that the requirements are complied by the Project. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion GRANT THORNTON (VIETNAM) LIMITED Nguyen Hong Ha Bui Tran Phuong Minh CPA Vietnam Practising Certificate CPA Vietnam Practising Certificate No: 1710-2018-068-1 No: 2595-2018-068-1 Deputy General Director Auditor Hanoi, Vietnam 28 June 2019