flice of the Director Ge ral Foreign Aided Projects Au t Directorate AuditSComplex (6& 1 "' Floor) Segunbagicha, D `6 www.fapad.org.bd bL3 No.82,08.0000.212.07.600.217- 5ictr Date: - -2021. Sub: Audit Inspection Report on the Accounts of "Investment Promotion and Financing Facility II (IPFF II) Project" financed by IDA credit No.6004 (Portion-A)-B1) & 6005 (Portion-3)-) for the year 2020-2021. The audit inspection report along with a management letter is containing audit observations on the accounts of the above mentioned project is enclosed for your kind information and necessary action. Enclosures: i) Auditor's Report. ii) Financial Statement & Notes to F.S. iii) Manageient Letter. iv) Report on SOE & Special Account. Senior Secretary (Nazma Parvin) Ministry of Finance Deputy Director Finance Division [or Director General Bangladesh Secretariat, Dhaka. Foreign Aided Projects Audit Directorate Phone: 88-02-48310545. No.82.08.0000.21207.600.2l.-55- Date: - 12-2021. Copy for information and necessary action to:- 1. Th Secretary, Economic Relations Division (ERD), Ministry of Finance, -e-Bangla Nagar, Dhaka-1207. 2, Country Director, World Bank, E-32, Agargaon, Sher-e-Banglanagar, Dhaka-1207. 3 Project Director, Investment Promotion and Financing Facility-IL (IPFF-ll) Project, Bangladesh Bank, 24' Floor, Motijheel, Dhaka. (a)Replics/comments on the Audit Report and Management Letter may please be sent to the undersigned within Thirty (30) days of receipt of this letter in your office. (b) Observations in Part-A (SFI) should be responded to through the Ministry concerned and observationsin Part-B (Ordinary) should be responded to FAPAD directly. 4. Office Copy. (Nazna Parvin) Deputy Director For Director General Foreign Aided Projects AUdit Directorate Phone: 88-02-48310545. 1 Audit Inspection Report On The Accounts of 'Investment Promotion and Financing Facility II (IPFF II) project" finance by IDA credit No.6004 (Portion- A) BD & 6005 (Portion-B)-BD for the year 2020-2021. Foreign Aided Projects Audit Directorate, Segunbagicha, Dhaka. 2 Table of Contents SI. No Contents Pages Part-I 01. Information Regarding to Audit 4-7 Auditor's Report 9 Financial Statements 10-12 Report on SOE/DOSA Special Accounts 13-14 Summary of Audit Observation 15 Overall Comments on Observations 16 02. Management Letter 17-19 Section-one Introduction 17 Background 17 Objectives of the project 17 Scope of Audit 17 Project Implementing Unit's details 18 Project Cost 18 Funding System 18 Adequacy of management structure 18 Section-Two Detail Audit Observations 19-22 Overall Audit Results 23 Section Three Follow-up Action 24 Part-Il 03. Annexure 25-29 3 INFORMATIONREGARDINGTO AUDIT: (A) AuditProfile: 1. Name of the audit Unit : "Investment Promotion and Financing Facility II (IPFF-II) project" 2. Nature of Audit Financial & Compliance Audit. 3. Credit Agreement number Credit No.6004-portion-A & 6005-portion-B-BD 4. Development Partner IDA 5. Project Duration July,2017 to June,2022 (5 year) 6. Audit of duration : 11-10-2021 to 13-10-2021 7. Commencement, July/2017 8. Project completion year : 30 June-2022 9. Audit year 2020-2021 10. Audit Status :4 year 11. Executive Agency Bangladesh Bank 12. Name of Ministry : Ministry of Finance 13. AuditTeam Team No. 11 Md. Al-Monsur, Audit & Accounts Officer MohammadNuruzzaman,Audit&Accounts Officer Md. AnisurRahaman,S A S super 14, Audit Methodology : Check of Internal Control System * Compliance to the related rules & regulations of * GOB and donor guidelines. * Documentary, Test check of vouchers, * Physical verification, * Analytical review, etc. 4 15. Scope of audit Fundamentally the audit needs to cover operational aspects of IPFF-II for the FY 2020-2021 but our audit scope is narrowed down and it will only cover the areas identified based on data analysis. However, in line with the audit objectives the audit team will examine: The scope of audit includes selected areas under IPFF-II that are in receipt of project funding. These include: Review of Financial Statement to form an audit opinion, and electronic data of the accounts. Find out the cause of irregularities and their impact on project implementation. Check of fund receipts & expenditure made by the project authority. Analyses the various accounting records, reports prepared by the project authority. Check of loan disburse and its authentication. Check of the procurement of goods and services. Verification of bills/vouchers, Stock and Assets Register. Verification of Resources, Opening balance. Scrutinize the TAPP, Agreements, Annual Work plan, Files and other activities of the Project. Review of Internal Control System as well as Internal Audit Report. 16. Contract and Mail of PD Project Director's Name: Dr. AbulKalarn Azad Designation: Executive Director & Project Director Contact No: 9530537, Fax No: 9530479. E-mail Address: abul.kalamazad@bb.org.bd 17. Location of PD Office Bangladesh Bank,24t' Floor, Motijheel, Dhaka, 18. Audit Methodology Test check of vouchers. Certification of Annual Financial Statement. 19. Total estimated cost of Project : Total estimated cost:BDT. 10231.00 lakh [GOB 410.00 lakh, Development Partners (PA) 7870.00 20. Current year expenditure : 41049.71 lakh.( GOB Tk.38.94 lakh + RPA Tk.41010.77 lakh) 5 21, Project objectives : i) The main objective: The main objectiveof the project to build capacity of the financial institutions and other stakeholders, i.e. Bangladesh Bank, PPP Authority, line ministries etc. for promoting private sector-led infrastructure financing in Bangladesh. ii) Specific objective: Specific objective of the project are as follow:- * to further build and strengthen the ecosystem of long-term infrastructure financing in Bangladesh. * to develop and enhance the capacity of the financial institution for long-term infrastructure financing; and * to promote the role of private sector entrepreneurs and concerned public institution in the development of infrastructure project. 22. Funding system PA Fund: The project authority maintained two bank accounts: one is Dollar Special Account (DOSA) for IDA contribution and other is Local Currency Account for GOB contribution. This amount kept in the Forex Reserve and Treasury Management Department of Bangladesh Bank, Head Office, Motijheel, Dhaka bearing Account no. DOSA 6004(portion-A)-BD&6005(portion-B) for IDA fund and Account no. TAKA 6004-BD & 6005-13D for GOB fund. The project authority claimed IDA fund through Interim Un-audited Financial Report (IUFR) as per requirement and World Bank replenishes the fund to the DOSA. The project authority issues advice for payment of eligible expenditures from Dollar Special Account (DOSA). GOB fund: GOB fund was withdrawn by the Project Director by submitting requisition to CAO, Finance as per GO from Ministry and GOB fund deposited into A/C Taka 6004 & 6005 BD. 6 23. Audit Objective Forming opinion as to whether all transactions have been recorded in the project accounts accurately, timely with existence and adequate supporting documents for ensuring true and fair view in the financial statement; The funds have been utilized for purpose intended by the Development Partners and DPP; The payments and receipts are in accordance with authority, statutory rules and orders and other regulations; Procurement management considers actual need, competitive market price, best quality product, timeliness, integrity and contract agreement and implementation for the welfare of the country; Internal control system of the project ensures sound accountability, transparency, financial management and co-ordination among Development Partner, head office, site offices and other related agencies; Moreover review the main activity of this project that is the progress of supplement the resources of the recipient financial market to provide term finance for infrastructure investment project and promote the role of private sector entrepreneurs in the development of infrastructure; 7 卜』 Payt一I 口口口口口口口口口口口口口口口口口自劇目■口團口 .Auditor&sReport& .ManagementLetter 8 AUDITOR'S REPORT Audit Completion Date: 13/10/2021 Senior Secretary Ministry of Finance Finance Division Bangladesh Secretariat, Dhaka. 1. We have audited the accompanying Financial Statement of "Investment Promotion and Financing Facility-11 (IPFF-11) project" financed by IDA credit no.6004-BD, portion- A & 6005-13D, portion-13 as at 30"' June 2021 and for the year then ended. The preparation of the Financial Statement is the responsibility of management. Our responsibility is to express an opinion on the Financial Statement based on our audit. II. We conducted our audit in accordance with International Standards on Auditing and best practices of INTOSAI, SAI& GAS13 of Bangladesh- Those standards require that we plan & perform our audit to obtain reasonable assurance about whether the Financial Statement is free from material misstatement. An audit includes examining on a test basis, evidences supporting the amounts and disclosures in the Financial Statement. An audit also includes assessing the accounting principles used & significant estimates made by management, as well as evaluating the overall Financial Statement presentation, We believe that our audit provides a reasonable basis for our opinion. Ill. In our opinion, the Financial Statement gives a fair view in all material aspects of the financial position of "Investment Promotion and Financing Facility-11 (IPFF-11) project" financed by IDA credit no.6004-131), portion- A & 6005-131), portion-Bas at 30th June, 2021and the results of its operations and cash flows for the year then ended in accordance with cash basis of accounting followed by the Government of Bangladesh. IV. Opinion status: Unqualified (Nazma Parvin) Deputy Director For Director General Foreign Aided Projects Audit Directorate Phone: 88-02-48310545. 9 RESTURS E Other Sourcest TOTAL RESOURCES SCSS 2 2.24 :2:aT EXPENDIfURE IDA Part 51 2 t22722 3244: 32 -WS 3572(6 ài 2moij 3l234 < U noi2 M2c::a_________ Total A0P 6 o.nt TOTAL EXPENDITURE 38D 2 AS 8A1 Tender Security Money Trnsferrad to Got. AC - CLOSING CA SH BALANCE 4 Special Acc.ount jn rm n m. (TA Credit No, i600iI .- . 7 1AKA A/C (TAKAA/C '! i:T-i ' L7-:* ProjecaOoeting A/ccocM N TOTALEXLOSIGECAND CISAL AH AANC583 371 41 i8 7 TOTA-LOPNDOUEAD LSN CASH BALLANC 9661____37 92 T828S 14 10 NOTES TO THE FINANCIAL STATEMENT 1. GOVERNMENT OF BANGLADESH Goverinient of Bangladesh provided funds to cover GoB's share of eligible expenditures of the Project as specified in the Financing Agreement and TAPP. During the FY 2020-2 1, GO contributed a total of Taa 5900 la. After maintaining GoB's share of eligible expenditures, Taka 20.06 lac has been refunded to the GoB. Hence, the resources provided by GoB stand as follows: (In Lac Taka) Upto 30" June, 2020 For the year ended Since inception to . 30"'June, 2021 301h June, 2021 1 2 3 4=(2+3) Disbursement by GOB 457.05 59.00 516.05 Less: Refund to GOB 276.19 2006 296.25 Total: 180.86 38.94 219.80 2. LOAN FROM LENDER/DONOR IDA provided a total of US0 11.00 million equivalents to Taka 9131.16 lac as initial advance to cover its share of eligible expenditures of the Project as specified in the Financing Agreement and TAPP of the Project. The resoUrces provided by IDA stand as follows: (in Lac Taka) Upto 301h June, For the year ended Since Inception to 2020 30"' June, 2021 30Ih June, 2021 J 1 2 3 4=(2+3) Opening Balance - 58377.37 - RPA (DA Procedures) 9620201 24423.84 120625.85 Non SOE Procedures ____ Total Received 96202.01 82801.21 1 120625.85 Less: Refund to IDA - - Total IDA Resources 96202.01 82801.21 120625.85 Add: Exchange Gain/Loss 230,88 (32.01) 198.87 Less: Expenses 38055,52 41010.77 79066.29 Closing Balance 58377.37 41758.43 41758.43 3. OTHER RESOURCES 1] Exchainge Gain/Loss RPA based disbursement method is used for IDA Credit No. 6004-(Portion A)-BD and 6005 (Portion 8)-BD, IPFF It is maintaining a foreign currency denominated DOSA account (Investment Promotion and Financing Facility il (IPFF 11) IDA Credit No. 6004-(Portion A)-BD and 6005 (Portion B)-BD) for withdrawal and utilization of IDA fund, On the other hand, accounting currency of GoB is Bangladesh Taka. Therefore, USD balances lying in DOSA account are translated into Taka to prepare financial statement. In doing so, exchange gain or loss whichever arises are aggregated and shown in other resources. However, this gain or loss accrued to IPFF II has been used for the sole purposes of the Project. The resources kinder this category are as follows; (In Lac Taka) Upto 30 June, For the year ended Since inception to 2020 30'June, 2021 30' June, 2021 1 2 3 4=(2+3) Project revenues Exchange gaIns/losses 230.88 (32.01) 198.87 Total 230.88 (32.01) 198.87 11 NOTES TO THE FINANCIAL STATEMENT ccount Td Lt V-aka 17,00( of tender earnest noncy was forfeited and kept iii project's taka acuoont which was duly refunftd to Govt Account on 13 Auglist, 2018. 4. CLOSING BALANCE IPFF 11 maintains two bank accounts namely Investment Promotion and Financing Facilty II (IPl:F l) IDA Credit No. 6004-(Portion A)-BD and 6005 (Portion 8)41 for IDA portion and TAKA A/C for JPFF 1l (6004-80 & 6005-BD)-GoB Furd for GOB contribution. IDA portion is mairtained with the Forex Reserve and Treasury Management Department of Bangladesh Bank, On the other hand, Taka Account is maintained with Accounts and Budgeting Department of Bangladesh Bank. The unspent balance (if any) lying with TAKA account is refunded to GoB. In FY 2020-21, Taka 20.06 lac (Tk.20,05,600,02). has been refunded to the Gon on 30 June, 2020 Year-end cash balances of these accounts are as follows: (In Lac Taka) Upto 30 For the year ended Since inception to . .June, 2020 30'June 2021 30 une 2021 1 2 4 Cash in hand - Specia Account: (Investment Promotion and 58377374 41758.43 Financing Facility II (PFF 11) IDA Credit No. 6004-(Portion A)-BI and 6005 (Portion B)-BD) _ TAKA: TAKA A/C for IPFF 11( 6004-BO & 6005- 0 0 0 BD)-GoB Fund - -- - --- ------ ctOpatingAccourt/ Field stations 0 0 0 Total 58377. 7 41758.43 7_84 *At the end of FY 2020-21, DOSA account balance was USD 49,243,434.11 which is ecuivalent to Takn 4,175,843,212.53 (as per exchange rate of 30"h June, 2021 u50 1 = BOT 84.80). (D( Executive Director Project Dircctoi Phone: 9530537 12 AUDIT OPINION ON SOE We have audited Statement of Expenditure (SOE) of the on the accounts of "Investment Promotion and Financing Facility-IL (IPFF-11) project" 30t" June, 2021 submitted to the World Bank (WB) for re-imbursement of expenditure in accordance with the IDA credit No.6004- BD,portion- A & 6005-BD, portion-B Dated 05-11-2017. The audit was conducted following International Standards on Auditing which includes tests of the accounting records and supporting documentation. In our opinion, the presentation and submission of claim to IDA authority on the basis of expenditure of statement (SOE) was valid and can be relied upon by IDA. Opinion status: Unqualified. (Nazma Parvin) Deputy Director For Director General Foreign Aided Projects Audit Directorate Phone: 88-02-48310545. 13 AUDITORS REPORTS ON SPECIAL ACCOUNT 1. We have audited the special account statement of "Investment Promotion and Financing Facility-II (IPFF-II) project" 30"' June, 2021 submitted to the Bangladesh Bank(BB) for re-imbursement of expenditure in accordance with the IDA credit No.6004-BD, portion- A & 6005-BD, portion-B Dated 05-11-2017. 2. Our audit was carried out in accordance with International Standards on Auditing. Accordingly, our audit included such review of the tests of the accounting records and supporting documentation, verification of accounts balance and reconciliation that we have considered necessary under the circumstances. 3. The accompanying special account statement was prepared on the basis of initial deposits and withdrawal for the purpose of complying with above agreement. 4. In our opinion the receipts are properly accounted for and withdrawal were made for the purpose of the project in accordance with lone the above special account gives a true and fair view of the beginning & ending balance and the account activity for the year ended 30"' June 2021 on the basis of cash deposits and withdrawal 5. The special account is being maintained according to the approval of Finance Division. The withdrawal of money is in accordance with authorization of Finance Division. 6. Opinion status: Unqualified. (Nazma Parvin) Deputy Director For Director General Foreigii Aided Projects Audit Directorate Phone: 88-02-48310545. 14 Summary of Audit observations Subject Remarks Unqualified. Status of Financial Statement Fund management is satisfactory. Summary of Management Letter Government orders should not be maintained properly. Para Title Amount Remarks No. Involved (Tk.) PART-A NIL PART-B3 1. The financial targets of the project last four years have not - been achieved. 2. Irregular expenditure incurred for stamp and seal and Tk.89,412.00 computer consumable item from another code 3. Unauthorized expenditure incurred for the salary of Tk. 16,69,104.00 outsourcing violates the order of the Ministry of Finance. Total Tk 17,58,516.00 15 Overall Comments on Observations Causes of irregularities & loss * Non compliance of financial rules & regulations Audit Recommendations * Due care should be given for compliance of the Govt. financial rules and regulations. 16 Part-I ALnnexuxre Criteria/Govt. Order 25 Para-01 Annexure-A "Investment Promotion and Financing Facility-II(IPFF-II) Project" financed by IDA under Credit No.6004(Portion-A) 6005(Portion-B) BD in the office of the Project Director, financial year 2020-2021. Project target/progress of last 04 years target were not achieved as specified in the RADP Implementation Status of IPFF-II Figure in lac. Tk. FY Target Achievement % ADP Non ADP Total ADP Non ADP Total ADP Non ADP Total 2017-18 358.00 - 358.00 186.75 - 186.75 52.16% - 52.16% 2018-19 1480.00 63000.00 64480.00 198.56 - 198.56 13.42% - 0.3 1% 2019-20 1059.00 80000.00 81059.00 222.87 37628.20 37851.07 21.05% 47.04% 46.70% 2020-21 700.00 75000.00 75700.00 174.85 40874.86 41049.71 24.98% 54.50% 54.23% Total 3597.00 218000.00 221597.00 _783.03 78503.06 79286.09 21.77% 36.01% 35.78% 26 Para-02 Annexure-B Statement showing Irregularly expenditure incurred for stamp and seal and computer consumable item amounting to Tk.89,412.00 form another code in respect of project "Investment Promotion and Financing Facility-II(IPFF-II) Project " financed by IDA in the office of the Project Director for the financial year 2020-2021. S, Expenditure incurred1 Sl. fromdthe cd name of Code Bill no amount remarks from the code 1 Stamp & seal (3255104) Sl- 79 to84 7,392.04 expenditure Stationary incurred from 2 (3255105) Computer consumable (3255101) SI-85 to95 82,020.15 another code 89,412.00 27 Para-03 Annexure-C Statement showing unauthorized expenditure incurred for the salary of outsourcing Tk. 16,69,104.00 violate the order of the Ministry of Finance. in respect of project "Investment Promotion and Financing Facility-II(IPFF-I1) Project " financed by IDA in the office of the Project Director, for the financial year 2020-2021. SL Economic Code Economic Head Voucher No. Date Amount (in Tk) Comment 1 3211131 Outsourcing 75 31.08.2020 109,160.00 2 321I131 Outsourcing, 76 03.09.2020 110,142.00 Outsourcing cost was 3.3 211131Outsoucing 77 " 110.00 not included into ZD TAPP. 4 3211131 Outsourcing 78 " 32,912.00 5 3211131 Outsourcing 79 29.09.2020 14,760,00 6 3211131 Outsourcing 80 "i 12,800.00 7 3211131 Outsourcing 81 06.10.2020 109,651.00 8 3211131 Outsourcing 82 55.00 9 3211131 Outsourcing 83 " 16,456.00 10 3211131 Outsourcing 84 20.10.2020 14,720.00 II 3211131 Outsourcing 85 04.11.2020 109,651.00 12 3211131 Outsourcing 86 " 55.00 13 3211131 Outsourcing 87 " 16,456.00 14 -3211131 Outsourcing 88 11-11.2020 7,360.00 15 3211131 Outsourcing 89 " 6,080.00 16 3211131 Outsourcing 90 02.12.2020 109,651.00 17 3211131 Outsourcing 91 " 55.00 18 321113 1 Outsourcing 92 " 16,456.00 19 3211131 Outsourcing 93 20.12.2020 7,040.00 20 3211131 j Outsourcing 94 " 6,880.00 21 3211131 Outsourcing 95 04.01.2021 109,651.00 22 3211131 Outsourcin 96 " 55.00 23 3211131 Outsourcing 97 " 16,456.00 28 24 3211131 Outsourcing 98 19.01.2021 13,600.00 25 3211131 Outsourcing 99 04.02.2021 109,651.00 26 3211131 Outsourcing 100 55.00 27 3211131 Outsourcing 101 [ 16,456.00 28 3211131 Outsourcing 102 22.02.2021 12,640.00 29 3211131 Outsourcing 103 02.03.2021 109,651.00 30 3211131 Outsourcing 104 " 55.00 31 3211131 Outsourcing 105 " 16,456.00 32 3211131 Outsourcing 106 11.03.2021 12,480.00 33 3211131 Outsourcing 107 01.04.2021 109,651.00 34 3211131 Outsourcing 108 "1 55.00 35 3211131 Outsourcing 109 " 16,456.00 36 3211131 Outsourcing 110 12.04.2021 13,280.00 37 3211131 Outsourcing 111 03.05.2021 109,651.00 38 3211131 Outsourcing 112 "1 55.00 39 3211131 Outsourcing 113 " 16,456.00 40 3211131 Outsourcing 114 11.05.2021 9,840.00 41 3211131 Outsourcing 115 02.06.2021 109,651.00 42 3211131 Outsourcing 116 ", 55.00 43 3211131 Outsourcing 117 "4 44 3211131 Outsourcing 118 17.06.2021 14,080.00 45 3211131 Outsourcing 119 24.06.2021 109,651.00 46 3211131 Outsourcing 120 " 55.00 47 3211131 Outsourcing 121 " 16,456.00 48 3211131 Outsourcing 122 27.06.2021 9,600.00 Sub Total J 1,669,104.00 29