THE PROJECT MANAGEMENT UNIT OF WATERWAY NORTHERN DELTA TRANSPORT DEVELOPMENT PROJECT Credit Agreement IDA No. 6028 - VN (Parts A and C) AUDITED FINANCIAL STATEMENTS Fiscal year ended 31 December 2022 Northern Delta Transport Development Project Credit Agreement IDA No. 6028 - VN (Parts A and C) CONTENTS Page PART [ INDEPENDENT AUDITORS' REPORT ON THE FINANCIAL STATEMENTS Report of the Project Management Unit 3 Independent Auditors' Report on the Financial statements 4-5 Audited Financial statements Statement of Funds and Expenditures 6 Statement of Funds Balance 7 Statement of Designated Account 8 Statement of Withdrawals and Reconciliation of Funds 9 Notes to the Financial statements 10-14 PART II INDEPENDENT AUDITORS' REPORT ON 15-16 THE INTERNAL CONTROL SYSTEM PART Ill INDEPENDENT AUDITORS' REPORT ON 17-18 THE COMPLIANCE PART IV MANAGEMENT LETTER 19-22 2 Northern Delta Transport Development Project Credit Agreement IDA No. 6028 - VN (Parts A and C) REPORT OF THE PROJECT MANAGEMENT UNIT The Project Management Unit of Waterway ("the Project Management Unit" or "PMU-W) presents this report and the Financial Statements of the Northern Delta Transport Development Project (Parts A and C) ("the Project") for the fiscal year ended 31 December 2022. The Project The Project is implemented under the Credit Agreement IDA No. 6028 - VN dated 23 June 2017 ("the Agreement') between the Government of the Socialist Republic of Vietnam and the World Bank. The Project Management Unit Members of the Project Management Unit in the year and to the reporting date are: Mr- Duong Thanh Hung Director Mr. Tran Quoc Bao Deputy Director Mr. Nguyen Xuan Lam Deputy Director Ms. Nguyen Thi Thanh Huyen Head of Finance & Accounting department Auditors The auditors of AASC Limited have taken the audit of financial statements of the Project. Responsibilities of the Project Management Unit The Project Management Unit is responsible for preparing the project financial statements, including Statement of Funds and Expenditures, Statement of Funds balance, Statement of Designated Account, Statement of Withdrawals and Reconciliation of Funds, which comply with the accounting policies described in the attached Notes to the Financial Statements. The Project Management Unit assures that the accounting policies are appropriately selected and consistently applied. The Project Management Unit assures that the accounting records were fully maintained to prepare the financial statements in accordance with the applied accounting policies and to disclose, with reasonable accuracy at any time, the financial position of the Project. The Project Management Unit is also responsible for maintaining an effective internal control as management determines necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and comply with relevant laws, regulations and other provisions of the funding agreement that could have a direct and material financial effect on the Project financial statements. On behalf of the Project Managementfnit Duong Thanh Hung Director Hanoi, 24 April 2023 3 aasc sincE 1991 No.: 240423.010/BCTC.FIS2 INDEPENDENT AUDITORS' REPORT ON THE FINANCIAL STATEMENTS To: The Project Management Unit of Waterway The Northern Delta Transport Development Project (Parts A and C) Opinion We have audited the accompanying financial statements of Northern Delta Transport Development Project (Parts A and C) ("the Project") which comprise Statement of Funds balance as at 31 December 2022, Statement of Funds and Expenditures, Statement of Designated Account, Statement of Withdrawals and Reconciliation of Funds, and Notes to the Financial Statements for the fiscal year then ended, including a summary of significant accounting policies. In our opinion: The accompanying financial statements give a true and fair view of the financial position of the Project, including the balance of the Designated Account as at 31 December 2022, funds received and expenditures incurred, movements of the Designated Account for the year then ended in accordance with the basis of the principal accounting policies described in the Notes to the Financial Statements and the provisions of the Credit Agreement IDA No. 6028 - VN; In addition, with respect to Statements of Expenditure, adequate supporting documents have been fully maintained to support to the replenishment requests submitted to the World Bank. The expenditures are eligible and in right purposes of the Credit Agreement IDA No. 6028 - VN. Basis of 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 Project Management Unit in accordance with the international Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants ("IESBA Code"), and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of the Project Management Unit for the Financial Statements The Project Management Unit is responsible for the preparation of the financial statements in accordance with the principal accounting policies described in Notes to the Financial Statements, 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 relating to going concern and using the going concern basis of accounting unless management either intends to cease operations, or has no realistic alternative but to do so. Auditor's 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 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 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. T:(84) 24 38241990 I F:(84) 24 3825 3973 1 1 Le Phung Hieu, Hanoi, Vietnam ; :.. as.o. AASCAUDITING FIRM 4 As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism 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, 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; 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 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; Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with the Project Management Unit 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. ,AA- ;kWfiked I X "br a uong Nguyen Pham Hung Deputy General Director Auditor in-charge CPA Registered No.: 0744-2023-002-1 CPA Registered No.: 2893-2020-002-1 Hanoi, 24 April 2023 5 � N � с� [] о N'�`, м ��� о � с�ч м т�-°� ��о� ocv,�un оиro�tсосз � �� - N� с7 о й са �л о� о cri вi а+ о � cv г,� аэ ��ч оо с� ссэ и со а м ,+� s3 � г_ о ссэ_ Q с� �i- � rз ао с�_ � � ,а-�+ � � г � С`') lЛ 00 г г'GT 1`� � CI) Ш U С''? {'') о О �о Г�7 Ср О 1'� OS9 � U Q о С7 с� � а0 и� сл N СС� '"У f" Р` v _ � Ср - ct сгх ['.! cV t0 Cri r'Э � �U � � {7� N� г '� Lfi г ГК1 С'l М т S г Ci7 N� бD 1� 67 iG М .� � 11.. Ш й _ � CV � О f� б� СА Со 'д' � о(9 C.te� U? 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Z � Ш �� Ш т v о �' � � � � � Ш о ш э � р cv �j с4 т г� cv � � � Q N � � и р сэ С!} � � � U � �- � Gt � о L � � � � � •� � Х � С3 � � Q) U � � � L � ta. �э � � Ш и UЭ � -° � � !- � и- � ? �- � � ��-, .иэ ш � sa ш Q© U�-с ��� с� � а. 0 � � � rз а� ¢ � j � � � ш in `� о � � � � п � � L з L] N Ш� И и L = ��� ш `L i ш �.�3 � � � � iZ з с � � � g � � О � �- h`� LL1..�UQ ШUС3�С�� U} "� � Q г�б О i F{L1 г S�1 С'`) = г N С7 �' �f? � Z С� f/i %- r � _ Northern Delta Transport Development Project Financial Statements Credit Agreement IDA No. 6028 - VN (Parts A and C) Year ended 31 December 2022 STATEMENT OF FUNDS BALANCE As at 31 December 2022 Note 31/12/2022 31/1212021 VND VND Surplus Surplusi(Deficit) as at begining 217T642,307,587 113,967,213,189 Surplus/(Deficit) in the year (236,617,091,080) 103,675,094,398 Surplus/(Deficit) as at closing (18,974,783,493) 217,642,307,587 Represented by: Current assets 38,707,560,307 241,706,667,569 Cash in bank 5 20,444,917,492 81,091,418,362 Advances to contractors 7 18,262,642,815 160,615,249,207 Current liabilities 57,682,343,800 24,064,369,982 Payables to contractors 8 57,682,343,800 24,064r359,982 Net worth (1 8,974,783,49a 217,642,307,687 7 Northern Delta Transport Development Project Credit Agreement IDA No. 6028 - VN (Parts A and C) STATEMENT OF DESIGNATED ACCOUNT For the period: from 01/01/2022 to 31/12/2022 Account holder: The Project Management Unit of Waterway Account No: 1200208011115 Bank: Vietnam Bank for Agriculture and Rural Development Transaction Center Address No. 2 Lang Ha, Ba Dinh District, Hanoi Credit Agreement IDA No.: 6028 - VN PART A: ACTIVITIES Note USD USD Opening balance 3,577,036.54 Add: Total amounts deposited by the World Bank 15,000,000.00 Deduct: Total amounts withdrawn (17,703,695.34) Closing balance 873,341.20 PART B: RECONCILIATION 1. Amount advanced by the World Bank 4,684,932.84 2. Add: Amount supplemented by the World Bank 15,000,000.00 3. Deduct: Amount recovered by the World Bank (17,141,617.20) 4. Present outstanding amount advanced to 2,543,315.64 5. Closing balance 873,341.20 6. Add: Amounts claimed and not yet recovered 1,535,662.33 Amounts withdrawn and not yet claimed (1) 134,252.55 Overseas bank charges 60.00 1,669,974.88 7. Deduct: Other (0.44) 8. Total advances accounted for 2,543,315.64 (1) Including: USD Consultant 25,989.01 Civil Works 108,263.54 134,252.55 8 � � �л � � о `� :� � �.° � � � N � � z ,._. ._. .... � � ,� .__. .-� .°:� _ _ ______ _____ __ __ У� Ф (6 � r- ! м м о д? м 63 ! � CD а0 м ц7 1� ! _г с0 � CV М сЭ. гл си с�'-' cv гQоаоослсл Nиоаооео т_м и � � д� t-�- м�7 аО и aU с3) 6� гЛ т N N 4� CV с3� (53 Q1 (А -� м (f) М С�Э aD С� е-� N N С7 �t о[`7 (f] [fJ ti '� ❑ �� 1`-_ СЛ о© С33 CD 1� b'J С.� 'cf С�ь М М ад о СО iц �г � с� cv�ммrnсо �мспr�г� и� с�а�п �° сбсэ v о�7сцмаог оо1�-мМ�г- гN мсл 11 _ �S7 00 v� о Vi а0 С� 'Г Оа �f' Cfl С�} '� CV t.i) +fl.7 �.. Q� L{'3 г . �� . �i v tiв т � г � Q) � Q ! о ! ! , � , ! о о ! , r ! ! �} ! а б ! ! о � �� о о о о о � о � у- О о О О О � о О � ¢ С7 о О о Q р О � С7 О о О о О Г> � 43 о о О о о О U N сл N t`� г'� N И Ф с^ С � � N Сц (�! СЧ f V RI © �--� � ❑ N fV N С�З N С`[ д _ � `� � `" V �П W 6J г о О С7 CJ о г � � _ а г о б? г 00 С�! 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N �� � fб М`гJ' 'cf' V° Ct' V" �9' ц'_Э ц� Г� f� С57 W� б? 4'� О N г CV CV i1S '27� ❑ Ш �� � � Г..� � б О о О О О О б О О О U� О д б о б Г� -,г` � а� �-. �-- ш� 45 "6 N С7Э О 6� 0Э � о°О ��!fi ц1 м гЛ г.f) ц) г 4f СА Са г CS7 С•7 6Э � О L +r Г Г г Г' (у (ij (у (�J Q Q(�f [�J Г(у м г г(V о г г Г '�. � � � .� � � � G� д W z б] _ � 4D °� � r�� � � �У �Л �4 м а0 о<- N М<у' и СО м �О О г N[`') �7' GQ м о0 �� �� 4��" ° �и г�ммс�м�rvд-�-��v�v�n�n�n�гзиии�и 4F- Q � i-�о z Gj �t<Сддддддддддддддддд�дд ^ гс� исз� `�� Northern Delta Transport Development Project Financial Statements Credit Agreement IDA No. 6028 - VN (Parts A and C) Year ended 31 December 2022 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2022 1 . Background The Northern Delta Transport Development Project (Parts A and C) is implemented under the Credit Agreement IDA No. 6028 - VN dated 23 June 2017 (the "Agreement") between the Government of the Socialist Republic of Vietnam and the World Bank ("WB'). The objective of the Project is to assist in enhancing the efficiency, environmental sustainability, and safety of transport infrastructures and services through alleviation of physical and institutional bottlenecks in the Northern Delta Region. The Project consists of the following parts: Part A: Multimodal transport Corridor Investment. Improving two waterway corridors in the Northern Delta Region to increase the efficiency of multimodal transport and supply chains and enhance the environmental sustainability of the waterway system. Part B: Investments in Ferry boat stages: (1) Improving about 15 to 30 ferry boat stages to improve passenger safety for river crossing; (2) Providing technical assistance for engineering design and construction supervision related to the implementation of Part B of the Project. Part C: Institutional support to Ministry of Transport, Viet Nam Inland Waterways Administrative and the Project Provinces. The Project officially came into operation since 23 June 2017 and is expected to close on 30 June 2023. The Project is implemented by The Project Management Unit of Waterway (PMU-W) and People's Committee of Nghia Hung District, Nam Dinh Province (PPMU). Their offices are located at: Units Address PMU-W No. 308, Minh Khai St, Hai Ba Trung Ward, Hoang Mai District, Hanoi Nghia Hung PPMU Lieu De Town, Nghia Hung District, Nam Dinh Province 2. Principal Accounting Policies a. Basis of preparation of the Financial Statements The annual accounting period commences from 1 st January and ends at 31st December. The financial statements are prepared in accordance with the requirements of the World Bank and presented in Vietnam Dong (VND), except for the Statement of Designated Account and Statement of Withdrawals and Reconciliation of Funds, which are prepared in United State Dollar (USD). The Financial Statements are prepared for funds received and expenditures incurred in relation to Parts A and C of the Agreement that is implemented by the PMU-W and P PMU. The principal accounting policies are summarized as below: 1b. Foreign currencies Funds received from the World Bank in foreign currencies are translated into VND using exchange rates announced by the Ministry of Finance receipt dates or dates of direct payment made to contractors/suppliers. Transactions incurred during the year in foreign currencies are converted to VND at the service bank's rate (mentioned in Note 2d) as of the transaction date. Foreign currency asset balances and liabilities at the end of the fiscal year are revalued at the exchange rate of the servicing bank (mentioned in Note 2d) as at the date of the Statement of Funds balance. The exchange rate differences arising from these transactions are recorded in the exchange rate difference account and presented to the other funds on Statement of Funds and Expenditures. 10 Northern Delta Transport Development Project Financial Statements Credit Agreement IDA No. 6028 - VN (Parts A and C) Year ended 31 December 2022 c. Funds and Expenditures Funds: Funds received from the World Bank are recorded when remittance made into Designated Accounts or direct payment made to contractors/suppliers; Counterpart funds of the Vietnamese Government are recorded when payments are made directly from the Vietnamese Government to contractors/suppliers of the Project or funds are remitted to the PMU-W and PPMU for settlement of the Project's activities. Expenditures: Expenditures are recorded when they are actually incurred, except for Land acquisition costs which are recognized when the State Treasury approves the settlement. d. Designated account Designated Account is the deposit account in USD opened at Vietnam Bank for Agriculture and Rural Development - Transaction Center for the Project's activities. Payments made via Designated Account are for eligible expenditures of the Project in accordance with the provisions the Credit Agreement IDA No. 6028 - VN. 3. Funds received from the World Bank Year 2022 Accumulated to 31/12/2022 Original Equivalent Original Equivalent currency to VND currency to VND Designated account Advance 15,000,000.00 348,280,000,000 35,000,000.00 812,130,000,000 Amount refunded to - (5,000,000.00) (116,115,000,000) World Bank 15,000,000.00 348,280,000,000 30,000,000.00 696,015,000,000 4. Counterpart funds Accumulated to Year 2022 31/12/2022 VND VND Nghia Hung PPMU 3,447,316,000 90,585,208,400 PMU-W 40,039,252,087 130,748,471,826 43,486,568,087 221,333,680,226 5. Cash in bank 31/12/2022 31/12/2021 VND VND Designated account (USD) 20,444,917,492 81,091,418,362 20,444,917,492 81,091,418,362 11 С N �� д' V е'��i Q� р О р N W N f О � О ц? t^� �' CCJ р О� G � С7 i.Л сЛ 4 г7 �с- С'7 � � ы.�+ � �t f�N- � Ои0 б� М� CNj- � СС1 т--� г й7 ш о с�з со о г�~- �" � c�.,�v � й ° и� аэ tW са �r р�- ~ си •�� �ц�э��� �� м � с т ti а' о � с� � U � _ � , о "и �'�' �' �-о [] аа С} с�э 4� СО , р�р 1`� � � N� О д t'? 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О�� �� О� О � Х �,._. � с� сUс���Ф �, � i-ш ,� -г� � � � U ер Northern Delta Transport Development Project Financial Statements Credit Agreement IDA No. 6028 - VN (PartA and C) Year ended 31 December 2022 7. Advances to contractors 31112/2022 31/1212021 VND VND Civil Works 18,262,642,815 159,261,737,476 Waterway Construction Consultants JSC 7,620,248,877 12,861,580,631 Lilama 10 JSC 5,171,497,599 15,071,037,780 Huyen Minh Construction Corporation 2,798,027,697 4,202,806,755 Entech Vietnam Trade Construction JSC 1,962,858,000 HJC Group lnvestment - Construction JSC 710,010,642 5,368,839,905 Phu Xuan Construction and Consultant JSC - 63,525,161,558 HUD1 Investment and Construction JSC - 22,196,807,111 Hai Duong-Rural Development and Dike Stone - 16,029,473,264 Construction JSC Hanoi Construction Investment JSC - 8,367,746,998 Viet Nam Agricultural of Construction JSC - 6,629,443,282 Truong Loc Construction Project JSC - 5,008,840,192 Consultant's services 1,353,511,731 VIPO Trading and Investment Consultant JSC 1,067,286,141 AASC Limited 286,225,590 18,262,642,81 160,6152249,207 8. Payables to contractors 31/12/2022 31/12/2021 VNID VND Civil Works 53,188,546,550 21,843,382,821 Phu Xuan Construction and Consultant JSC 22,801,025,066 575 Construction Investment and Construction JSC 3,775,104,009 13,981,068,597 Hai Duong-Rural Development and Dike Stone 11,226,678,823 Construction JSC Truong Loc Construction Pro ect JSC 6,001,739,295 - Tharglong Construction JSC 4,283,318,074 5,556,961 024 HUD1 investment and Construction JSC 2,166,749,174 Hanoi Construction Investment JSC 1,853,886,809 Hong Ha Company 1,080,045,300 2,305,353,200 Consultant's services 4,493,797,250 2,220,977,161 V1 PO Trading and Investment Consultant JSC 3,833,194,613 - Thanh Nam Investment Consultancy and Electric 79,614,500 79,614,500 319 Corporation Ministry of National Defence - 901,099,600 Lung Lo Construction Corporation 603,523,400 Thanh An Corporation - 500,693,300 Others 580,988,137 136,046,361 57,682,343,80 24,064,359,982 9. Subsequent events There have been no significant events occurring after the reporting date, which would require adjustments or disclosures to be made in the financial statements. 13 Northern Delta Transport Development Project Financial Statements Credit Agreement IDA No. 6028 - VN (Parts A and C) Year ended 31 December 2022 10. Approval of the Financial Statements The corresponding figures are the financial statements for the year ended 31 December 2021 which were audited by AASC Limited. 11. Approval of the Financial Statements The financial statements were approved by the PMU-W for issuance on 24 April 2023, Duong Thanh Hung Nguyen Thi Thanh Huyen Director Head of Finance & Accounting department Hanoi, 24 April 2023 14 aasc sincE 19 No.: 240423.010/BCTC.FIS2 INDEPENDENT AUDITORS' REPORT ON THE INTERNAL CONTROL SYSTEM To: The Project Management Unit of Waterway The Northern Delta Transport Development Project (Parts A and C) We have audited, in accordance with International Standards on Auditing, the financial statements of the Northern Delta Transport Development Project (Parts A and C) ("the Project") for the year ended 31 December 2022 and issued the auditors' report thereon dated 24 April 2023 expressing an opinion on those financial statements, In connection with our audit of the financial statements, we also examined the effectiveness of internal control over compliance with requirements that could have a direct and material financial effect on the financial statements as well as the internal control over financial reporting for the fiscal year ended 31 December 2022. Responsibilities of the Project Management Unit The Project Management Unit is responsible for maintaining an effective internal control over compliance with requirements that could have a direct and material financial effect on the financial statements as well as the internal control over financial reporting. Auditor's Responsibility Our responsibility is to express an opinion on the effectiveness of internal control based on our examination. Our examination was conducted in accordance with the International Standard on Assurance Engagements (ISAE) 3000 (Revised). 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 has maintained an effective internal control over compliance with requirements that could have a direct and material financial effect on the financial statements as well as internal control over financial reporting. Our examination included obtaining an understanding, testing, and evaluating the design and operating effectiveness of the internal control, and performing other procedures as we considered necessary in the circumstances to obtain sufficient appropriate evidence to provide a basis for our opinion. Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not to be prevented or detected on a regular basis. In addition, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. T:(84) 24 38241990 I F:(84) 24 3825 3973 I 1 Le Phung Hieu, Hanoi, Vietnam OS AASC AUDITING FIRM 15 Auditors' opinion In our opinion, the Project has maintained an effective internal control over misstatements that could have a direct and material financial effect on the Project financial statements for the fiscal year ended 31 December 2022. AA2OAi~ Do B/tknW Nguyen Pham Hung Deputy General Director Auditor in-charge CPA Registered No.: 0744-2023-002-1 CPA Registered No.: 2893-2020-002-1 Hanoi, 24 April 2023 16 aaSC sincE 51 No.: 240423.010/BCTC.FIS2 INDEPENDENT AUDITORS' REPORT ON THE COMPLIANCE To: The Project Management Unit of Waterway The Northern Delta Transport Development Project (Parts A and C) We have audited, in accordance with the International Standards on Auditing, the financial statements of the Northern Delta Transport Development Project (Parts A and C) ("the Project") for the year ended 31 December 2022 and issued the auditors' report thereon dated 24 April 2023 expressing an opinion on those financial statements. In connection with the audit of the financial statements, we also performed procedures on the Project's compliance with the Credit Agreement IDA No. 6028 - VN dated 23 June 2017, law and regulations that have a direct and material effect on the Project's financial statements for the fiscal year ended 31 December 2022 ("the Requirements"). Responsibilities of the Project Management Unit The Project Management Unit is responsible for complying with the Requirements applicable to the Project. Auditor's Responsibility Our responsibility is to express an opinion on the Project's compliance with the Requirements based on our procedures. We limited our tests of compliance to the Requirements, and we did not test compliance with all laws and regulations applicable to the Project. We performed our work in accordance with the International Standard on Assurance Engagements (ISAE) 3000 (Revised). 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 has complied with the Requirements. An assurance engagement to report on the compliance with the Requirements at the Project involves performing procedures to obtain evidence about whether the Project's activities are free of material non-compliance with the Requirements, including obtaining an understanding of the internal control relevant to the Project's compliance with the Requirements. The procedures selected depend on the auditors' 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 financial effect on the Project's financial statements. Our procedures included testing the compliance with the Requirements we consider necessary to provide a reasonable assurance that the Requirements are complied by the Project. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. T:(84) 24 38241990 I F:(84) 24 3825 3973 1 1 Le Phung Hieu, Hanoi, Vietnam acoV AASC AUDITING FIRM 17 Auditors' opinion In our opinion, the Project has complied with the Requirements that could have a direct and material finanTiff gn the Project's financial statements for the fiscal year ended 31 December 2022. AASC LiMited Do Manh Cuong Nguyen Pham Hung Deputy General Director Auditor in-charge CPA Registered No.: 0744-2023-002-1 CPA Registered No.: 2893-2020-002-1 Hanoi, 24 April 2023 18 NORTHERN DELTA TRANSPORT DEVELOPMENT PROJECT Credit Agreement IDA No. 6028 - VN (Part A and C) MANAGEMENT LETTER Fiscal year ended 31 December 2022 aaSC Hanoi, 24 April 2023 To: The Project Management Unit of Waterways The Northern Delta Transport Development Project We have conducted the audit of financial statements of the Northern Delta Transport Development Project ("the Project") for fiscal year ended 31 December 2022. During the course of our engagement, we reviewed the accounting procedures and internal controls, and examined the compliances with laws, regulations and the Credit Agreement IDA No. 6028 - VN. Accordingly, we enclose a memorandum of the points noted by us during our audit together with recommendations thereon. We have discussed the matters with the Directors, and the responses were incorporated in our memorandum. We would also like to extend our sincere thanks to Director, Head of Finance & Accounting department and your staffs for the co-operation you all have extended to us during our recent audit visit. We look forward to working with you again soon, and in providing you with the required assistance, if any, in your future endeavours. Yours airterely, Do IanLIong DepufyGeneral Director T:(84) 24 3824 1990 1 F:(84) 24 3825 3973 I 1 Le Phung Hieu, Hanoi, Vietnam -- AASC AUDITING FIRM 19 Northern Delta Transport Development Project Management Letter Credit Agreement IDA No. 6028 - VN (Parts A and C) Year ended 31 December 2022 CONTENTS 1. Project implementation and disbursement progress ......................................................................21 2. Bidding package im plem entation progress ......................................................................................21 3. Preparation of the Withdrawal Application ("WA")............................................................W2.............22 20 Northern Delta Transport Development Project Management Letter Credit Agreement IDA No. 6028 - VN (Parts A and C) Year ended 31 December 2022 1. Project implementation and disbursement progress Observation and Implication As at 31 December 2022, the disbursement rate of the World Bank capital of the project has been improved, however, it is still lower than the total investment while the deadline for closing the credit is 30 June 2023. Accumulated disbursement Total investment up to 31/12/2022 Proportion USD USD % The World Bank fund 78,740,000.00 29,126,658.80 36.99% The reason for the low rate of disbursement progress is due to the effect of 2021 such as the social distancing due to Covid-19, heavy rain and landslides at the construction site. In addition, the project also encountered the site clearance (mentioned in the ensuing section). Recommendation We recommend the Project Management Board to accelerate necessary activities to ensure the progress of implementation and disbursement according to the plan extended by the World Bank until 30 June 2023 and ensure the objectives and results of the project. The PMU's response The project progress has been significantly improved, specifically: we have completed the construction of the overpass (opening to traffic on 22 March 2023) and the train path. Regarding the canal, we have completed more than 80% of the construction progress and are expected to come into operation in June. 2. Bidding package implementation progress Observation and Implication We observe that bidding package "Relocating and returning the clean water pipeline system under the subproject site clearance of Day - Ninh Co canal, Wb6 project" - using counterpart funds of Nghia Hung District People's Committee (as the role of the investor) - have not yet agreed on the plan of replacing the clean water pipe of Mai Thanh Co., Ltd. Therefore, the contractor of the above package - Entech Vietnam Trade Construction Joint Stock Company (with their advance as of 31 December 2022 of VND 1,962,858,000 presented in Note 7 of the financial statements, and the first time acceptance of work in 2022 of VND 1,116,661,000) could not continue performing their work according to the terms of their contract. Recommendation We recommend that Nghia Hung District People's Committee shortly agree on a plan to relocate and return the clean water pipeline to Mai Thanh Co., Ltd.; solve the outstanding difficulties and problems in order to improve the implementation progress of the project. The PMU's response The Management Board of Waterway Projects, the Ministry of Transport, the People's Committee of Nam Dinh Province and other departments have subtitled the written comments on the design and adjustment of the temporary water pipeline through the canal connecting Day - Ninh Co. On 29 March 2023, Nghia Hung District People's Committee issued Decision No. 831/QD-UBND approving the construction drawing design of the item "Temporary adjustment of clean water pipeline" to serve the further construction work. according to the Project. 21 Northern Delta Transport Development Project Management Letter Credit Agreement IDA No. 6028 - VN (Parts A and C) Year ended 31 December 2022 3. Preparation of the Withdrawal Application ("WA") Observation and Implication Through checking the procedure for making statement of expenditures (SOE), we noticed that the WA No. A46 dated 25/07/2022 has been refunded in a shortage of USD 0.01 due to rounding input data. Also the WA No. A58 dated 19/12/2022 has been refunded in an excess USD 0.45 due to mistakes input data by Project Management Unit. Specifically: Content WA No. A46 WA No. A58 Contract CV-A2.6-NDTDP CV-A2.9-NDTDP Contractor Phu Xuan Construction and Thanglong Construction JSC Consultant JSC Payment 5th of acceptance 8th of acceptance Date payment 09/06/2022 01/12/2022 SOE (a) 161,941.46 USD 90,436.50 USD Actual payment (b) 161,941.47 USD 90,436.05 USD Difference (b-a) 0.01 USD (0.45) USD Recommendation We recommend the Project Management Board to adjust the amount stated in the withdrawal application with the corresponding contract expenditure in the next time. The PMU's response Agree with the auditors' opinion. 22