FINANCIAL ATTEST AUDIT REPORT ON THE ACCOUNTS OF THIRD PUNJAB EDUCATION SECTOR PROJECT FINANCED BY WORLD BANK & DFID (CREDIT NO.86200-PK, GRANT NO.202697) PLANNING AND DEVELOPMENT BOARD, GOVERNMENT OF THE PUNJAB FOR THE FINANCIAL YEAR 2021-22 AUDITOR GENERAL OF PAKISTAN ISLAMABAD TABLE OF CONTENTS Page No. Abbreviations and Acronyms 3 Preface 5 PART-I 7 Project Overview 9 Auditor's Report to the Management 11 Financial Statements 13 PART-II 15 COVERING LETTER TO THE MANAGEMENT 17 LETTER EXECUTIVE SUMMARY 19 MANAGEMENT LETTER 21 1. Introduction 23 2. Audit Objectives 23 3. Audit Scope and Methodology 23 4. AUDIT FINDINGS AND RECOMMENDATIONS 25 4.1 Organization & Management 25 4.2 Financial Management 35 4.3 Procurement and Contract Management 42 4.4 Recoveries 56 4.5 Overall Assessment 59 5. CONCLUSION 61 6. ACKNOWLEDGEMENT 63 ABBREVIATIONS AND ACRONYMS ADP Annual Development Plan AG Accountant General DAC Departmental Accounts Committee DDO Drawing & Disbursing Officer DG Director General DLI Disbursement Linked Indicators ECNEC Executive Committee of the National Economic Council ECE Early Childhood Education ELP Early Learning Programme FD Finance Department FCDO Foreign, Commonwealth and Development Office GoPb Government of Punjab GBP Great Britain Pound GST General Sales Tax lAs Implementing Agencies IBRD International Bank for Reconstruction and Development INTOSAI International Organization of Supreme Audit Institutions IPSAS International Public sector Accounting Standards ISSAI International Standards of Supreme Audit Institutions MTDF Medium Term Development Framework NCB National Competitive Bidding P&D Planning and Development PAD Project Appraisal Document PC-1 Planning Commission Form no.1 PD Project Director PEC Punjab Education Commission PESP Punjab Education Sector Project PFR Punjab Financial Rules PIU Project Implementation Unit PPRA Public Procurement Regulatory Authority PST Punjab Sales Tax PDWP Provincial Development Working Party SDA Special Drawing Account TOR Terms of Reference USD United States Dollar 3 4 PREFACE The Auditor General of Pakistan conducts audit in terms of Articles 169 and 170 of the Constitution of the Islamic Republic of Pakistan, 1973 read with Sections 7 & 8 of the Auditor General's (Functions, Powers and Terms & Conditions of Service) Ordinance, 2001. This audit of Financial Statements of the Third Punjab Education Sector Project (PESP-III) financed by Government of the Punjab and World Bank for the Financial Year 2021-22 was carried out accordingly. The Directorate General of Audit Punjab, Lahore conducted audit of the PESP-III during March, 2023 for the Financial Year 2021-22 with a view to report significant findings to stakeholders, World Bank and Govt. of the Punjab. Audit examined the economy, efficiency and effectiveness aspects of the PESP-III. In addition, Audit also assessed, on test check basis, whether the management complied with applicable laws, rules and regulations in managing the entity. The audit report indicates specific actions that, if taken, will help the management realize the intended objectives. The report has been discussed during the exit meeting with the PESP-III management in March, 2023. The audit observations included in this report have been finalized in the light of discussions held with the management though no written reply was provided by the management. The management did not convene DAC meeting despite a number of reminders sent to the Administrative Department. The report consists of two parts i.e. Part-I contains Auditor's Report (Audit Opinion) and Financial Statements and Part-Il consists of Executive Summary, Management Letter and Audit Findings with recommendations. The report has been prepared for submission to the World Bank in terms of the provisions set forth in the Program Appraisal Document. Dated: 9th June, 2023 (Muhammad Ejaz-ul-Haq) Place: D.G. Audit Punjab, Director General Lahore 5 б PART-I I- Project Overview 2- Auditor's Report to the Management 3- Financial Statements 7 � � � � F = � � ' . ' � � ! � ё � 1 ОО PROJECT OVERVIEW Name of Programme Third Punjab Education Sector Project Sponsoring Agency World Bank/IBRD Executing Authority Programme Implementation Unit, School Education Department Loan No. 86200-PK Principal Loan Amount USD 300.00 Million Programme Cost USD 300.00 Million Date of Commencement 01.09.2016 Date of Completion 31.12.2021 Date of Closing Loan Agreement 30.06.2022 Utilization Status (Rs. in Thousand) Amount utilized Amount Utilized up to during 2021-22 30-06-2022 (Progressive Total) World Bank 4,171,350 61,779,391 FCDO 1,002,782 6,990,463 GovL Of Punjab 328,254,232 1,535,333,454 9 10 AUDITOR'S REPORT TO THlE MANAGEMENT Auditor's Report on PESP-III Financial Statements We have audited the accompanying Financial Statements of Third Punjab Education Sector Project (PESP-III) that comprise Statement of Receipts and Payments, Statement of Comparison of Budget and Actual together with the notes forming part thereof for the year ended 3 01h June, 2022. Management's Responsibility It is the responsibility of project management to establish and maintain a system of internal controls, and prepare and present the Statement of Receipts and Payments in conformity with the requirements of IPSAS-Cash Based Financial Reporting and Accounting Standards. Auditor's Responsibility The responsibility of the auditor is to express an opinion on the Financial Statements based on the audit conducted. We conducted our audit in accordance with International Standards of Supreme Audit Institutions (IS SAIs). These standards require that we plan and perform the audit to obtain reasonable assurance whether the Financial Statements are free from material misstatements. The audit process includes examining, on a test check basis, evidence supporting the amounts and disclosures in the Financial Statements. It also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall statement presentation. We believe that our audit provides a reasonable basis for our opinion. Opinion In our opinion: (a) The Financial Statements to the extent of Third Punjab Education Sector Project present fairly, in all material respects, the cash receipts and payments by the project for the year ended 301hjune, 2022 in accordance with cash basis IPSAS, Financial Reporting under the Cash Basis of Accounting Standards. (b) The expenditure has been incurred in accordance with the requirements of legal agreement. Dated: 9h June, 2023 (Muhammad Ejaz-ul HIaq) Place: D.G. Audit Punjab, Lahore. Director General 12 FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30TH 2022 13 14 Third Punjab Education Sector Project (PESP-lII) Receipts & Payments Against Financing Sources (Donors & GoPb) Statement of Cash Flows For the year ended June 30, 2022 Own Source Donors Total Description Notes (GoPb) US$ GBP Rs. in '000' Rs. in '000' Rs. in '000' Opening Balance 3.0 126,220 - 16,824 - 16,824 RECEIPTS - GoPb Receipts 4.2 - - - 328,254,232 328,254,232 IBRD Credit 4.1.3 27,280,914 - 4,861,945 - 4,861,945 Direct Payment by IBRD 4.1.2 1,070,965 - 191,565 191,565 Grant from FCDO 8.2 - 5,981,354 1,350,795 1,350 "3 Total 28,478,099 5,981,354 6,421,129 328,254,232 334,675,361 PAYMENTS - - - - From GoPb allocation 5.2 - - 328,254,232 328,254,23? Payment from Donors 5.1 21,907,992 - 3,979,785 - 3,979, /8' Financing Direct Payment by IBRD 5.1 1,070,965 - 191,565 - 191,56S From FCDO 8.2 - 4,498,325 1,002,782 - 1,002,782 Total 22,978,957 4,498,325 5,174,132 328,254,232 333,428,364 surrender/lapsed/ Balance 8.2 - 1,483,029 348,013 348.03 from FCDO grant Amount surrendered from GoPb Amount lapsed from GoPb - - increase/decrease in cash due to exchange rate Closing Balance 6.0 5,499,142 - 898,984 - 898,984 MANAGER FINANCE & ACCOUNTS PROGRAMME DIRECTOR AUDIT 0 FICER FINANCIAL REPORTING UNDER CASH BASIS OF ACCOUNTING GOVERNMENT ENTITY Statement of Receipts and Payments Third Punjab Education Sector Project (PESP-III) For the year ended June 30, 2022 Rs in 000s Rs in 000s 2021-22 2020-21 Receipts/ Receipts/ Description Notes Payments Payments by Payments Payments by Pants b external third Total controlled external third Total ontr y parties entit parties ______________entity entity___ ________ _______ Receipts of GoPb 4.2 328,254,232 - 328,254,232 284,388,793 284,388, /T Direct Payment 4.1.2 191,565 - 191,565 261,308 61 Receipts from IBRD 4.1.3 4,861,945 - 4,861,945 6,295,604 - 6,295,604 Grant from FCDO 8.2 1,350,795 - 1,350,795 3,948,888 - 3,948.888 RECEIPTS 334,658,537 - 334,658,537 294,894,593 - 294,894,533 From GoPb share 5.2 328,254,232 - 328,254,232 284,388,793 284,388,193 From IBRD Credit 5.1 3,979,785 - 3,979,785 6,376,788 -6,370788 Direct Payment 5.1 191,565 - 191,565 261,308 201,308 From FCDO grant 8.2 1,002,782 - 1,002,782 3,654,807 3, n1 PAYMENTS 333,428,364 - 333,428,364 294,681,696 - 294,6,81 C9 Surrender/lapsed/Bal from 8.2 348,013 - 348,013 294,081 FCDO.g(ant.. Cash at beginning of year 3.0 16,824 - 16,824 98,008 - Increase/(Decrease) in Cash due to exchange rate Cash at end of year 6.0 898,984 - 898,984 16,824 - 16,824 MANAGER FINANCE & ACCOUNTS PROGRAMME DIRECTOR AUDIT OFFICER FINANCIAL STATEMENT FOR THE YEAR 2021-22 Third Punjab Education Sector Project (PESP-III) Statement of Comparison of Allocated and Actual Amounts For the year ended June 30, 2022 Rs in 000s Rs in 000s 2021-22 2020-21 Components Allocated Amounts Revised Amount Actual Amounts Allocated Amounts Revised Amount Actual Amouus Component - I Salary Related Expenses 337,610,364 307,272,530 296,427,257 298,393,000 270,194,536 17 ' 1" Punjab Education Foundation (PEF) 18,700,123 18,700,123 18,349,783 18,029,448 18,029,4487--- i Girls Stipends 5,528,255 5,528,255 5,528,250 5,531,751 6,128,248] Monitoring Systems (CM Monitoring force) 701,430 261,409 291,350 644,587 423,242 Non-Salary Budget 14,222,000 14,222,000 10,666,500 11,158,750 11,158,750 Total 376,762,172 345,984,317 331,263,140 333,757,536 305,934,224 290,47152AC Component - II Incremental TA Staffing (A03980) 64,298 194,298 185,973 61,236 107,329 Capacity Building (A03982) 301,396 1,805,702 784,904 287,044 250559 Expenditure Tracking/ TPVs - - - 40,500 7,594 Direct Payment by World bank 191,565 191,565 191,565 261,308 261,308 Total 557,259 2,191,565 1,162,442 650,088 626,790 w FCDO grant 1,350,795 1,350,795 1,002,782 3,948,888 3,948,8883 Grand Total 378,670,226 349,526,677 333,428,364 338,356,512 310,509,902 94,6,5 MANAGER FINANCE & ACCOUNTS PROGRAMME DiRECtOR AUDIT OFFI ER Programme Monitoring & Implementation Unit Third Punjab Education Sector Project (PESP-III) School Education Department Government of the Punjab Notes to the Financial Statements for the year ended June 30, 2022 1 Project Description (PESP-Il1) The Punjab Government has entered into a Project Agreement with International Bank for Reconstruction1 ! Development (IBRD) dated August 31, 2016 bearing Loan No.86200-PK in connection with the Loan Agrcemenw ( the same date between the Government of Pakistan and the IBRD for financing Third Punjab Education Sector Project (PESP-1ll), cost amounting to US $ 13,357.50 million for a period of five years. PESP-fll has two components: (i) a result based Component I- to finance PESP-HIl, amounting to USD 277.89 million (ii) Component 1 Tchni 1 Assistance (TA) component-to finance essential advisory, technical and capacity building support or 1)121 1 amounting to USD 21.36 million. The Credit proceeds are periodically disbursed on achievement oft9 mutualy vi and equally-weighted Disbursement Linked Indicators (DLIs). The credit proceeds can only be utilized auainR selected budget heads of GoPb. These budget heads have been declared as Eligible Expenditure Programme (LiPs)b the donors. Eligible Expenditure Programme (EEPs) for PESP-I comprise of - Salary related exp:duc. Stipends Program, NSB, Eligible expenditures incurred by PEF and CMMF. 1.1 Project Objectives The Project's Development Objectives are to support the education sector reform program of the (ovcnmenl Punjab with major goals of increased child school participation (at multiple level) and student aehie%ements. o aims to improve access, equity & quality and relevance of education in Punjab. 1.2 Scope of the Project Scope of PESP-III include provision of support to School Education Department and GouPb b ridli implementation gap and delivery mechanism. PESP-Ill embraces the principles of increased transpitere: participation and collaboration as essential to accomplish its mission, while spotlighting the parameters ot acwc. . quality and governance. .3 stimated Cost PESP-III Partners US$ (in million) IBRD 300.00 DFID 150.00 Provincial Govt. financing 12,907.50 Total 13,357.50 iniificankt Accounting Policies I Bisis of Presentation These financial statements have been prepared on the cash basis of accounting which recognizes transactions and events only when cash is received or paid by the entity. 2.2 Accounting Convention the sNstem-generated accounting records are the basis for preparation of these financial statements which are in conlormity with International Public Sector Accounting Standards (IPSAS) issued by the Public Sector Committee of the International Federation of Accountants. Accounting records are maintained using the government-wide integrated hinancial management information system (PIFRA) and in accordance with the governmental accounting procedures and policies defined in the New Accounting Model, issued by the Auditor General of Pakistan and are in conformity with internaiional good practices. These policies are consistently applied at the provincial as well as district levels. Foreign Currency Transactions Proceeds firom the Donors in foreign currency are translated into equivalent Pakistani Rupees by the State Bank of Pakistan at the rates prevailing on the date of transaction to the Consolidated Account No 1 (Non Food) of the Punjab 6overnment. No foreign currency transaction takes place in PMIU/SED or any organization under SED. Conversion rates from foreign currency to PKR in these financial statements have been applied as communicated by SBP at the Oime of transfer of funds to Provincial Consolidated fund (Account-I), both for receipt and payment purposes. 2.4vsd A Sets Fixed Assets of PMIU are disclosed on Historical Cost Basis. 25 Provisions Due to cash basis of accounting, no provision is recognized in financial statements. However, if there were any event which may have a legal or other obligation with contingent financial Implication, then it would have been identified by separate disclosure in the notes to the financial statements. a Offstetting Neither asset-liabilities nor fund flow and expenditure have been off set in the financial statements. 2.7 Recognition of Receipts Receipts are recognized when the required amounts are credited to the Punjab Government Consolidated Account No. I (Non Food) held with the State Bank of Pakistan. 2.8 Recognition of Expenditure Lxpenditure is recognized on the date when payment is made or cheque is issued. Financial year to which payment 1ertain is determined by the date on which a cheque or payment advice is issued. Cash and Cash Equivalents For the purpose of cash flow statement, cash and cash equivalents comprise cash in the Punjab Government Consolidated Account No. I (Non-Food) maintained with the State Bank of Pakistan related to IBRD Credit] for IlIs and for TA in the Assan Assignment Account with Government Treasury (Treasury Office Lahore). 2.10 Project Implementation and Closing Period IBRD Credit - starting August 31, 2016 and closing date 30th June 2022, However for the closing of the project W.\orid bank has extended the closing period upto Feb 2023. 3 Opening Balance Opening balance comprises: Description 2021-22 2020-21 USS Rs. (in 000) us$ Rs. (in 006) Cash at Bank 126,220 16,824 637,975 WLOUS GoPb Share - - Total 126,220 16,824 637,975 98,008 Closing Balance of the last year is shown as the Opening Balance of this year. 4 Receipts .4.1 IBRD Credit: S Telie IBRD under Loan Agreement dated August 31, 2016 bearing Credit No. 86200-PK extended the credit amute to US S300 million to assist the Punjab Government in financing the Project. The program has been declared eli c on 5 October, 2016. 'lhe Credit proceeds are periodically disbursed for: (i) Eligible Expenditure Programme (IH)s) omp Employecs related expenditure, Eligible expenditures incurred by PEF, Girls Stipends Prograu, Pro ision Salary Budget and Monitoring System of CMMF as declared so by Donor and (ii) TA - Goods. Consutps and Training and Workshops, from the IBRD Credit account to the Government of P1unjab ConsoliL[e Acco I (Noon-Food) through State Bank of Pakistan, based on Withdrawal Application submitted by GioPh. TA component funds received into Consolidated Fund Account are released into a Assan Assignment Accoi by GoPb. The funds maintained in AAA are part of the government's Treasury Single Account i' ore PM[U's designated persons. Use of AAA ensures availability of earmarked funds to PMIL for critic.l TA a timely basis. The quanta of resources transferred to the Provincial Consolidated Fund at each disbursement c ; l: rI successful achievement of nine Disbursement Link Indicators (DLIs). Funds for TA are, hov.clNr. Jinur . advance basis by the World Bank against forecasted amount by PMIU/SED. Disbursement Linked indicae lO Ill Ill are: DI-1-Private School Vouchers DLl-2-Public-private partnerships in education : DL,-3- Stip,i,ndk Secondary school girls; DLI-4- Early Childhood education ; DLI-5- Human Resource management: DI -6- Ql i I the Primary classroom; DLI-7- Student Assessment: DLI-8- School specific NSB; DLI-9-Daua strengheir i i performance management. 1I For Eligible Expenditure Program i'unds received under IBRD Credit No. 86200-PK during FY 2021-22 are as follows (Annex-A) Funds received lor the FY 2021/2022 US $ Rs in 000s Withdrawal application 35-Gopunjab 8 Dec 2021 9,710,000 1,722,831 Withdrawal application 39-Gopunjab 29 june 2022 6,270,000 1,286,077 Total funds received for the FY 2021/2022 15,980,000 3,008,908 4I Q For Technical Assistance lldcr conlponent 11 of PESP-Ill an amount of US$ 21.36 million has been allocated for Technical Assistance (TA) to e adulministered by PMlU under World Bank Financial and Procurement guidelines.TA component is executed nineh Assan Assignment account, and funds allocation is done by GoPunjab as part of regular budget of PMlU. Detail oF funding from 1BRD in TA component for the period is as follows: (Annex-A) Funds received for the FY 2021/2022 US $ Rs in 000s credited by SBP on 20 August 2021 11,300,914 1 ,8 5 3 ,0 3 7 lA Funds received during FY 2021/2022 11,300,914 1,853,037 Direct payments US $ Rs in 000s st Direct Payment 24 Sep 2021 165,154 27.924 2nd [irect Payment 03 Dec 2021 352,860 62,374 3rd Direct Payment 21 Jan 2022 288,704 50,881 lrd Direct Payment 21 Jan 2022 132,124 23,285 5th Direct Payment 29 Jun 2022 132,123 27,101 1 otal Direct Payments made by IBRD from TA FY2021-22 1,070,965 191,565 i"tal TA funds for tie FY 2021/2022 (TA+DP) 12,371,879 2.044.602 .ftal Funds from [Bi) for FY 2021-22 US $ Rs in 000s lIPs Linds received for the FY 2021/2022 15,980,000 3,008.908 'A FLun1ds received during FY 2021/2022 (excluding direct payments) 11,300,914 1,853,037 27,280,914 4.861.945 1.2 GoPh Allocation: see Para 5.2 of Punjab Govt. financing S P'avments Donors have identified paymentlexpenditure under certain budget heads as Eligible Expenditure Programme (EEPs) and have declared that expenditure under EEPs is eligible to receive funds from them. These funds are disbursed on reimbursement basis except for TA funds which are disbursed on advance basis. TA funds are, therefore, mentioned as closing balance at the end of the period. 1 Payment from Donors Financing Sub-Component 2021-22 2021-22 Irogwramnme Activities USD PKR in '000' IBRD- FEls 15,980,000 3,008,908 I'A* 5,927,992 970,877 Direct Payment by World Bank 1,070,965 191,565 Iotal 22,978,957 4,171,350 :L see note 5.2.6 ofTA for detailed expenditure under TA component of during the financial year Payments from GoPb Funds Punjab Government Financing for Eligible Expenditure Program Rs in 000s Rs in 000s 2021-22 2020-21 Salary related expenses (Note 5.2.1) 296,427.257 257.178V7 Grant to Punjab Education Foundation (Note 5.2.2) 18149783 1 78.4tn Girls Stipend (Note 5,2.3) 5,528,250 6.125. 19 Monitoring System - Chief Minister Monitoring Force (Note 5.2.4) 291.350 30 1.160 Non-Salary Budget (Note 5.2.5) 10,666,500 11,084,64 331,263,140 290,477,259 TA payment through SDA (Note 5.2.6) 970.877 788. Direct payment by WB (Note 5.2.6) 191,565 2. 332,425,582 291,026,889 Less: Funds provided by IBRD: Opening balance 16.824 98.008 IBRD: FY 2021/22 27.28 US$ million (2020/21 US$ 39.94 million) 4,861,945 6.295.601 Direct payment by WB 191.565 261.30s Funds from Development Partner 5,070.334 6.65 U) closing balance 898.984 ! AR Expenditure of Government of Punjab own financial resources 328,254,232 284,38,79)3 5.2.1 Salary related Expenditure Salary related Expenditure is the biggest expenditure under EEPs as it is eligible to consume major part of the fundin: by the donors. Salary related expenditure includes 091 Primary Education and 092 Secondary Education of lroviniwil and District salaries under School Education Department. The original budget allocated in the FY 2021-22 flor ler related expenditure for primary and secondary education was rupees 337.61 billion. I lowever, onl, s.2% could be utilized against revised Budget of Rs. 307.27 billion (Annex-B). 5.2.2 Grant to Punjab Education Foundation PEE was established in 1991 and restructured in 2004 as an autonomous Not For Profit entity to provide techinic: 1 financial assistance for establishment, expansion, improvement and management of low cost educational isiintit:. incentives to students and teachers and promotion of quality education in the Province through Public-Pr partnership. Grants are released to the Punjab Education Fund in quarterly installments into (he Personal I Account maintained with the Government Treasury, operated by the Managing Director of PET, Devciopnicii have identified certain expenditure lines in PEF budget that have been designated as Eligible Expeinditure P;;v, ([iEPs) of PEF.Expenditure amounting to Rs, 18.35 billion was incurred during FY 2021:2022 (Annex-c). 5.2.3 Girls Stipends Under Punjab Education Sector Reform Programme, Government of Punjab is implementing on activit\ that aff cash stipends to girls of grades (6-10) of government schools in selected districts with the Obiecives of impro enrollment,. increasing retention, reducing gender disparities and enhancing female prestige. The hnce paid in four equal quarterly payments subject to the condition of 80% attendance rate during the peri. programi is being administered through district education administrations and delivered throuh 1hilnce < Expenditure amounting to Rs.5.53 billion was incurred during FY 202 1/2022 (Annex-B). >.2.4 Chief Minister Monitoring Force (CMMF) GoPunjab plans to address shortfalls in outcomes mainly by strengthening governance and accountability.The quiet corruption from the underperformance of service delivery agents is a major concern.The most overt manifestation of unicirperformance is absence from work. Education managers at various levels may not carry out their administrative. monioring and support responsibilities and roles as expected, so GoPunjab plans to detect and address these risks thro- the monitoring of school staff performance by communities through school councils and regular collection of credible information on teacher absence and teacher on-task through CMMF inspections and feeding the information back to internal and external stakeholders and decision makers at multiple levels,Expenditure amounting to Rs.29 1.35 million was incurred during FY 2021/22 (Annex-D). ,3 Non-Salary Budget PI oNsion of school-specific Non-Salary Budget (NSB) to schools is an important initiative by the Government of a ib under P1unjab Education Sector Reforms. NSB program is aimed to equip Government schools with the ability II man1ge their resources based on their specific needs. Expenditures amounting to Rs.10.67 billion were incurred :ino FY 2(02122 (Annex-E). _2.6 Teehnical Assistance 1131M) credit proceeds are periodically disbursed on advance basis against forecast by PMIU/SED. The funds are - iransferred to GoPb Account-I by SBP accordingly. Whereas funds for all direct payments are placed with the World lank to mike payient on behalf of GoPb. TA component is executed through a Assan Assignment Account and funds al matuon is done by GoPunjab as part of regular budget of PMIU. IBRD Credit proceeds have been utilized for the 1lowin activities on account of Technical Assistance as provided by Go Punjab through AAA to PMlU 2021-22 Rs in 000s Incremental TA staffing (Annex-B) 185.973 Capacity Building (Annex-B) 784.904 I;pcnditure Tracking! TP Vs I onil !A expenditure from SDA 970,877 S1bxpenditure y World [lank (Direct payments) 191.565 I ttal [A cxpenditure 1,162.442 * TA component comprises of three heads i.e. (i) Incremental TA staffing- includes individual consultants rernuneration(ii) Capacity Building- includes training workshops, hiring of consultancy firms for execution of difficult assignients. (iii) Expenditure tracking/ TPV- includes expenditure incurred on hiring of firm or consultant to review, xalidate or impact evaluations conducted by third parties contracted by GoPunjab. Icaid o1' I'uding in TA component and its disbursement is as follows: VA Funds received FY 2021-22 US $ Rs in 000s Opening Balance as ofJune 30. 2021 126,220 16,824 1 iM) IA Funds received during FY 2021/2022 (Note 4.1.2) 12,371,879 2,044602 12,498,099 2.061,426 TA expenditure 5,927,992 970,877 Direct Payment 1,070,965 191,565 T otal TA expenditure 6,998,957 1,162.442 I 1Inlance as of June 30, 2022 on account of TA 5,499,142 898984 losing Balance l-in' bmanrce comprises: Liescription J 2020-21 2021-22 USM Rs. (in 000) US$ Rs. (in 000) Cash at Bank 126,220 16,824 5,499,142 898,984 Cash at Bank (GoPb Share) - - - - Total 126,220 16,824 5,499,42 898,984 Reconciliation of GoPb Accounts Govt of the Punjab allocated an amount of Rs. 377.12 billion for EEPs and TA for FY 2021-22, A total amount of Rs.332.23 billion was spent against revised budget of Rs.347.98 billion during FY 2021-22. 8 DFIDJFCDO Grant: 8.1 PMIU-PESRP is implementing school infrastructure improvement program (SlIP) with the DFID1) grant amountin2 to 35 million GBP. PMIU-PESRP is also implementing financial aid component with the DFID/FCDO grant amoundaiu: to 4.5 million GBP, major interventions are strengthening school leadership and teachers through digitization. tcachilr and learning in multigrade settings, strengthen remote learning, creating enabling environment in schools and showcasing the education reforms in Punjab, Under PC-21015 Education-09-Education Affairs and Services-092- Secondary Education Affairs and Services-0921-Secindary Education Affairs and Services-092102-Adiinistraition- LQ4481 Cost Centre L05675. Detail of Disbursement and funding in SlIP (Annex-F) GBP Rs in 000s Re-Authorisation of funds durring FY 2021-22 1.381T354 294.0(01 Amount Disbursed during FY 2021-22 600,000 1 26,87 1,981,354 10.9W Amount Utilized during FY 2021-22 1,975,541 419.709 Balance during FY 2021-22 5,813 1 "9 Detail of Disbursement and funding for bridge financing (Annex-G) G1P Rs in 000 Amount Disbursed during FY 2021-22 on 10 Jan 2022 2,000.000 Amount Disbursed during FY 2021-22 on 30 March 2022 2.000.000 16. 4,000,000 929.3 Amount Utilized during FY 2021-22 2,522.784 58307. Balance during FY 2021-22 1,477.216 316. 78 8.2 Total DFID/FCDO Grant FY 2021-22 Amount Disbursed during FY 2021-22 5,981.354 1330.7% Amount Utilized during FY 2021-22 4.498,325 IO007 Balance during FY 2021-22 1,483,029 348.( 13 9 Management Assertion This is certified that the funds have been utilized for intended purpose as defined in Project Agreenmet \sell Loan Agreement of PESP-JII for the financial year 2021-22. (Annex-H) 10 Authorization These financial statements were authorized for issuance by management of the Punjab Edutic"1n6w Stor P 't - Programme. MANAGER FINANCE & ACCOUNTS PROGRAMME DIRECTOR Auditor General of Pakistan Constitution Ave. Islamabad 44000 Dear Sir, This representation letter is provided in connection with your audit of the financial statements of Punjab Education Sector Reform Programme (PESRP) for the year ended 30 June 2022, for the purpose of expressing an opinion as to whether these financial statements give a true and fair view of the state of project's affairs as at 30 June 2022 and of its loss and cash flows for the year then ended in accordance with Approved Accounting Standards as applicable in Pakistan. We confirm that the representations we make in this letter are in accordance with the definitions set out in the Appendix to this letter. We confirm that to the best of our knowledge and belief, having made such inquiries as we considered necessary for the purpose of appropriately informing ourselves: Financial Statements 1. We have fulfilled our responsibilities, as set out in the terms of the audit engagement for the preparation and fair presentation of the financial statements (or preparation of financial statements that give a true and fair view) in accordance with Approved Accounting Standards as applicable in Pakistan. 2. We confirm that proper books of account have been kept by the project as required by applicable laws and regulations 3. We confirm that the balance sheet, receipts and expenditure account together with the notes thereon have been drawn up in conformity with the applicable laws and regulations and are in agreement with the books of account. 4. We confirm that the expenditure incurred during the year was for the purpose of the project's business. 5. We confirm that the activities conducted and the expenditure incurred during the year were in accordance with the objects of the project. All the transactions entered during the period have been approved at appropriate levels according to materiality levels approved by the EA/IA. 6, We confirm that no Zakat was deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980). 7. All events subsequent to the date of the financial statements and for which Approved Accounting Standards as applicable in Pakistan require adjustment or disclosure have been adjusted or disclosed, wherever applicable. 8. We believe there are no uncorrected misstatements. Information Provided 9. We have provided you with: a) access to all information of which we are aware that is relevant to the preparation of the financial statements, such as records, documentation and other matters; b) additional information that you have requested from us for the purpose of the audit; and c) unrestricted access to persons within the project from whom you determined it necessary to obtain audit evidence. All transactions have been recorded in the accounting records and are reflected in the financial statements. We acknowledge our responsibility for such internal control as we determine necessary for the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In particular, we acknowledge our responsibility for the design, implementation and maintenance of internal control to prevent and detect fraud and error. 10. We have disclosed to you the results of our assessment of the risk that the financial statements may be materially misstated as a result of fraud. included in the Appendix to this letter are the definitions of fraud, including misstatements arising from fraudulent financial reporting and from misappropriation of assets. 11. We have disclosed to you all information in relation to: a) There have been no instances of fraud or suspected fraud that we are aware of and that affect the project and involve: * Management; * Employees who have significant roles in internal control; or * Others where the fraud could have a material effect on the financial statements. b) There have been no allegations of fraud, or suspected fraud, affecting the financial statements communicated by employees, former employees, analysts, regulators or others 12. There have been no instances of non-compliance or suspected non-compliance with laws and regulations whose effects should be considered when preparing the financial statements. Further, we have disclosed to you and have appropriately accounted for and/or disclosed in the financial statements in accordance with Approved Accounting Standards as applicable in Pakistan all known actual or possible litigation and claims whose effects should be considered when preparing the financial statements. 13. We have disclosed to you the identity of the project's related parties and all the related party relationships and transactions of which we are aware and all related party relationships and transactions have been appropriately accounted for and disclosed in accordance with applicable laws and regulations. Included in the Appendix to this letter are the definitions of both a related party and a related party transaction. 14. The project has complied with all aspects of contractual agreements that could have a material effect on the financial statements in the event of non-compliance, for example debt covenants. 15. There are no formal or informal compensating balance arrangements with any of our cash and investment accounts. We have no line of credit arrangements. 16. We have no plans or intentions that may affect the carrying value or classification of assets and liabilities. 17, We have no plans to abandon lines of product or other plans or intentions on behalf of the project. 18. The project has satisfactory title to all assets. We confirm that we have completely and accurately recognized all transactions during the year involving expenditure incurred during the year. 19. We confirm that there are no unrecorded liabilities and all liabilities have been properly recorded / accrued at the balance sheet date. 20. We confirm that during the period there have not been any externally imposed capital requirements. We further confirm that to the best of our information and estimate and cash flow projections the project is expected to remain as a going concern in the foreseeable future. 21. Deferred tax is measured at the tax rates enacted or substantively enacted at the period end and represent those amounts that are probable of realization taking into account management's estimates of future taxable profit. In determining estimates of future taxable profit against which the deductible amounts can be utilized, management has considered the existence of taxable temporary differences that will reverse in the same period that deductible amounts will reverse and also has considered appropriate tax planning opportunities that the project is more likely than not to take advantage of in order to generate future taxable profit. The project is able to control the timing of reversal of all temporary differences in relation to investments in subsidiaries, branches and associates and investments in joint ventures for which deferred taxes have not been recognized, and it is probable that those temporary differences will not reverse in the foreseeable future. We have not received any advice or opinion that contradicts the project's support for accounting for income taxes, that contradicts the financial statement amounts and presentations in respect of tax, or that is necessary to understand the project's tax accrual and related matters and has not been disclosed to you. We confirm that impact of recognition of deferred tax relating to income under normal tax regime would be immaterial in context of overall financial statements. 22. We confirm that income tax and all other duties, taxes and government levies have been recorded completely and accurately, taking into account all the information available at the balance sheet date and no additional significant liabilities are expected to arise in respect of current or prior year with relation to the above-mentioned items. 23. We confirm that accounting policies have been consistently applied 24. We have considered which currency is the currency of the primary economic environment in vhich the project operates (the "functional currency"). In making this assessment, we have used our judgment to determine the functional currency that most faithfully represents the underlying transactions, events and conditions of the project. We confirm that Pak Rupee is the functional currency of the project as substantial expenses are incurred in Rupees. Yours truly, [MANAGER FINANCE] [PROGRAMME DIRECTOR]