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 2021 Northern Delta Transport Development Project Credit Agreement IDA No. 6028 - VN (Parts A and C) CONTENTS Page PART I 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 III INDEPENDENT AUDITORS' REPORT ON 17-18 THE COMPLIANCE PART IV MANAGEMENT LETTER 19-21 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 2021. 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 ("WB"). 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 Person in-charge 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 Managemen nit Duong Thanh Hung Director Hanoi, 31 May 2022 3 No.: 310522.003/BCTC.FIS2 INDEPENDENT AUDITORS' REPORTS 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 2021, 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 2021, 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; r 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 *n 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, indvidually 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 I 1 Le Phung Hieu, Hanoi, Vietnam AASC AUDITING 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 exsts, 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. AASC Limited o uong Nguyen Pham Hung Deputy eneral Director Auditor in-charge CPA Registered No.: 0744-2018-002-1 CPA Registered No.: 2893-2020-002-1 Hanoi, 31 May 2022 5 � N -о р о rn N� г� �r м о о о r- � Q ш с� � о м� и �э о г�г о с'� 6� оа �� � N� о �- ,� со со ш r*7 v г� сч и �� �° о� [V �-.'..... h c�l i'- [п CV 1L О {'�- о г и со и cs� стэ �- и Ф ч-а+ � � � О r�[fi rn� М W оо N М В� �° й t�- д� т о � г- с� сч сц fЛ Ш � r� rэ � � cfl r а? �п�i � г� д� й � а м ао � о � � � � � � �' rrv � � � о~о см�т °м г�v _ . - с�7 <- v и� г� м С .у� и- � д 1'� h© ["? И � О д' (�[ 00 � р� О�� Ш t9 1� Q 6� N М (ll � � V Ф ц� � � о �� М Ud'i � q�j �% О� О lN0 CS� г � С9 l17 Ф i- � U М � ц} б? V fi7 О] О ц� f53 � Ф 4� '�"' д' (i? 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U V � � 4� t4 Ш � .� и � а- � F� +,,, � Ш бf � Z � � � Z UJ са � � � � � о � � -� -� � � ;� д�- а д° го � � со Q с� cv а� О б � Ш � � � г� а- � © -а � � с� и И Q г� � и а � а с �� � Ш й Х � U и �� и_U � �ш и о и -*� т � � � и � � и г� ш О� 'ш � ur � и:Л �-и а� .' _�. п� U [С3 ц � SG G � С1 ы ` � � F" �' � � � -r7 а � й са � 3 0 ш ш � и и � ` � � � 'с_ � � _ � � с �° � .� � - с � � � � '- д с _ 5 � s� �`� � �i U О ш U U Q � О сЛ � L � U с�lэ � �� пi ri � � ni ri er` сл - Northern Delta Transport Development Project Financial Statements Credit Agreement IDA No. 6028 - VN (Parts A and C) Year ended 31 December 2021 STATEMENT OF FUNDS BALANCE As at 31 December 2021 Note 31/12/2021 31/12/2020 VND VND Surplus Surplus as at begining 113,967,213,189 Surplus in the year 103,675,094,398 113,967,213,189_ Surplus as at closing 217,642,307,587 113,967,213,189 Represented by: Cu rre nt assets 241,706,667,569 116,060,954,989 Cash at bank 5 81,091,418,362 75,922,656,333 Advances to contractors 7 160,615,249 207 40,138,298,656 Current liabilities 24,064,359,982 2,093,741,800 Payables to contractors 8 24,064,359,982 2,093,741,800 Not worth 217,642,307,587 113,967,213,189 7 Northern Delta Transport Development Project Financial Statements Credit Agreement IDA No. 6028 - VN (Parts A and C) Ye ar ended 31 December 2021 STATEMENT OF DESIGNATED ACCOUNT For the period: from 01/01/2021 to 31/12/2021 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 Opening balance 3,298,117.13 Add: Total amounts deposited by the World Bank 9,999,980.00 Deduct: Total amounts withdrawn (9,721,040.59) Closing balance 3,577,036.54 PART B: RECONCILIATION 1. Amount advanced by the World Bank 4,978,281,08 2. Add: Amount supplemented by the World Bank 10,000,000.00 3. Deduct: Amount recovered by the World Bank (10,293,348.24) 4. Present outstanding amount advanced to 4,684,932.84 5. Closing balance 3,577,036.54 6. Add: Amounts withdrawn and not yet claimed (1) 1,107,836.30 7. Add: Overseas bank charges 60.00 8. Total advances accounted for 4,684,932.84 (1) Including: USD Civil Works 904,347.80 Consultants' services 203,488.50 1,107,836.30 8 ч.�-� Г Q} N _ 4 � � � � +� � �� � �� �� М О� N Ш N и� С 1j iIi Qi N Г> а% � �. `� � �� ч h CD � о�0 М� С� � Г � � � 4 доэ аМ'3 � �.. сд М 1�- N г.7 I�1 N � � г ['7 �У' г О 11.. t� .... �. ..� � г . � С Ф _ i i (д � -� О О О 43 � � � � � Оор iD й Q � б7 ci� � � 6j С3Ф'в С�5] � . ',� � LA G� N � � rn � � Г �- iJ � � � � о О ц с� � т С] О Ф с_г3 с_'V. Vi (�,� У Q� � L (б П3 07 Г CiI СО� ~У' {б м Q� � � Н U J Ц� Q� N Ф � � � Г Г ,� Ф {� � N � � 4п сз о сд м Г о tЛ N О� � ..�у� . Г� N С7 h! N (П Cfl М 47 Г � IL1 Ш сП � Ш � и о� ��л и о � U а� оэ h � �� ц�Фi � м � о � � о и С t-- б� С7 О .. . fl М М h � с� U � о с,у , �; г � �J„ � US Q� Г�i Г � � . --. � � L �% .� N � � � , . О �� �° � °' � м о .х _ г CS7 Г г S? С � "J � О О� й) й7 т � � � b' N О 00�� �t? � g � r с.''7 V rЛ q - J_ ¢ � ++ -� �"� р � о � С] � aUi cU О t7 Ф Q � U � О 4 О р Q Q ц1 С Ф о ° -с� � � � � Q О 4 Ф С� СЭ � О Ф О гll v z f- `t �л ьп о � � Z ¢ � т. О � � и � � ь � � ; �о ¢ � ,, � ы N � с �] С1 L] � � �К' ¢ � и аэ ииrли д' р Q �Z� а � ��а� �М,,�- �� г�о �г� � °v и Q F � г- _�? .� с] � � ,'rj, СС1 � Q. � r Г г L� �� � � C�f N N N � о о о о � ш О с�а а � ш � г., с� �r г��г и ы "° С (6 � t'') ['7 М Ф � ,� � I--' � � � Сз „� О О г� � � ❑ Ш Ш� ПЭ � N N N С � � � � � � � 4[ Z � бу � Ll1 _ Ш � L'3] Ф Г cV С] V �� ¢��' и о 4 � о ,� � z с� й U�i z а� ¢ 4¢¢ F �. - - - - - - - - - - Northern Delta Transport Development Project Financial Statements Credit A9 reement IDA No. 6028 - VN (Parts A and C) Year ended 31 December 2021 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 December 2021 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 2022. 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 cornmences from ls' January and ends at 31s' 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 States Dollar (USD). The Financial Statements are prepared for funds received and expenditures incurred in relation to Parts A and C of the Agreement that are implemented by the PMU-W and PPMU. The principal accounting policies are summarized as below: b. 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 2021 c. Funds and Expenditures Funds: Funds received from the World Bank are recorded when remittance made into Designated Account 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 2021 Accumulated to 31/12/2021 USD Equivalent to VND USD Equivalent to VND Designated account Advance 10,000,000.00 231,680,000,000 20,000,000.00 463,850,000,000 Amount refunded to - (5,000,000.00) (116,115,000,000) World Bank 10,000,000.00 231,680,000,000 15,000,000.00 347,735,000,000 4. Counterpart funds Accumulated to Year 2021 31/12/2021 VND VND Nghia Hung PPMU 966,777,000 87,137,892,400 PMU-W 48,917,018,187 90,709,219,739 49,883,795,187 177,847,112,139 5. Cash at bank 31/12/2021 31/12/2020 VND VND Designated account (USD) 81,091,418,362 75,922,656,333 81,091,418,362 75,922,656,333 r N �❑ М д' М О С] 'Са С] 4 ® �� О Z f�0 (�О М� М О� N N г1) �� F�- � омб �~f? (Я W� О)� ' f � � Пк5 � у Q �1 r М oD U7 М� CV N � 6? О Р 1�- N~(+�" СО N ,� �� г 4fi hl г М q N � г3 � си oo cv c�i � г� д м; м � ' V � Г N'г 00 М N�`- s`'S ХЛ� г Р и/ � � � � � N И U_ �� С� О ч- С'� О h- I Q 4 N � � г�? 1.Г) О С'� S� N Q Сц ' и � �� � � j � � е~- C�D � й fмD �О Й Й Ш о р., Р 47С1 С�'S CD С1' ti CV � -� .� � -р � N о�0 CU м о й� т � � с_ v тr с� Р с7 с� cv `в � � � � М N г 00 М (д1j t�-• � С . � С� г р С � U С О Q с� (А tJ] � i CD � � � "~д' G ,� г о �.n О р t�. й � � СиD � б? н �Л � `1� ОП с�'7 М aj �1 � С7 О г F О U 1� г д4 � О7 р м Q1 � N М И г г - и « С ПS . О М И � С7 � р � f} N ч=•+ F- �l Ci1 1'- О�� N � И .. М� О h- а0 с{у (�j © р .. ССЛ г � CQ � � li1 U � И � с1' � (�О � N ` � О � � � � � � г г И N 'CS Т- �-_.: r О д Z7 С1 б� f� � Q�' � � С} �D _� �� � О О tмV м t�+. о 1 N г° � �0 О f� N N ~ И � �.� � Cfl f� �е- r- �А v Q � Р N f� f1 f� � С с� �- � оо с4 ао ао г� }' � с � � rn� с�о � Ф >- а � c�i й й дм,� cz U � о С7 С� � г I � О р i i � Q U ,� � � 1�- � [��. �.fl И �� т �л о со со cv ш тгц � о�оо�о aNi� й с .р Q Q� � � � д � f�- г'� о '�- о � г г г � 1 о � С7 � � � О С] � Ш Z 'С � и � .�'. � с о � си с '� .с ш z и¢ �� � � .х ш � � � й � �� ro � � � С i И С f!5 � � Q fб N � И (б �� И П1 -�' � � = � � fŭ � � � � � Ш Ш �3 а"--' .� V ���' Ш П Ш i � j 3 U��� Ш�7 _ И FU -� {р � � � V �� о- г��а '� а ° ��Q�C] � �_ ц�j CJ UU4�0 � � � �- а--� � � Ш г° с� � Northern Delta Transport Development Project Financial Statements Credit Agreement IDA No. 6028 - VN (Parts A and- ember 2021 7. Advances to contractors 31/12/2021 31/12/2020 VND VND Civil Works 159,261,737,476 35,568,202,891 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 Lilama 10 JSC 15,071,037,780 - Waterway Construction Consultants JSC 12,861 580,631 - Hanoi Construction Investment JSC 8,367,746,998 - Viet Nam Agricultural of Construction JSC 6,629,443,282 HJC Group Investment - Construction JSC 5,368,839,905 Truong Loc Construction Project JSC 5,008,840,192 10,732,301,210 Huyen Minh Construction Corporation 4,202,806,755 575 Construction Investment and ConstrucUon JSC - 10,679,862,852 Thanglong Construction JSC - 14,156,038,829 Consultants'services 1,353,511,731 4,570,095,765 VIPO Trading and Investment Consultant JSC 1,067,286,141 3,670,529,625 AASC Limited 286,225,590 899,566,140 160,615,249,207 40,138,298,656 8. Payables to contractors 31/1212021 31/12/2020 VND VND Civil Works 21,843,382,821 - 575 Construction Investment and Construction JSC 13,981,068,597 - Thanglong Construction JSC 5,556,961,024 - Hong Ha Company 2,305,353,200 - Others 2,220,977,161 2,093,741,800 319 Corporation Ministry of National Defence 901,099,600 901'099 600 Lung Lo Construction Corporation 603,523,400 603,523,400 Thanh An Corporation 500,693,300 500,693,300 Thanh Nam Investment Consultancy and 79,6114 500 79,614,500 Eletric Construction JSC Others 136,046,361 8,811,000 24,064,359,982 2,093,741,800 9. Subsequent events There have been no significant events occurring after the reporting date, wlh ch would require adjustments or disclosures to be made in the financial statements. 10. Approval of the Financial Statements The corresponding figures are the financial staternents for the year ended 31 December 2020 which were audited by AASC Urnited. 13 Northern Delta Transport Development Project Financial Statements Credit Agreement IDA No. 6028 - VN (Parts A and C) Year ended 31 December 2021 11. Approval of the Financial Statements The financial statements were approved by the PMU-W for issuance on 31 May 2022. Duong Thanb Hung Nguyen Thi Thanh Huyen Director Person in-charge of finance accounting department Hanoi, 31 May 2022 14 No.: 310522.003/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 2021 and issued the auditors' report thereon dated 31 May 2022 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 2021. 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 3824 1990 I F:(84) 24 3825 3973 I 1 Le Phung Hieu, Hanoi, Vietnam 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 2021. AASC Limited Go Manh Cbon'g Nguyen Pham Hung Deputy General Director Auditor in-charge CPA Registered No.: 0744-2018-002-1 CPA Registered No.: 2893-2020-002-1 Hanoi, 31 May 2022 16 No.: 310522.003/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 Deta Transport Development Project (Part As and C) ("the Project") for the year ended 31 December 2021 and issued the auditors' report thereon dated on 31 May 2022 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, law and regulations that have a direct and material effect on the Project's financial statements for the fiscal year ended 31 December 2021 ("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' judgmient, 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 3824 1990 I F:(84) 24 3825 3973 I 1 Le Phung Hieu, Hanoi, Vietnam I.' X AASC AUDITING FIRM Auditors' opinion In our opinion, the Project has complied with the Requirements that could have a direct and material financial effect on the Project's financial statements for the fiscal year ended 31 December 2021. ASCLimited- Do iVanh,Cuong Nguyen Pham Hung Deputy Gene4al Director Auditor in-charge CPA Registered No.: 0744-2018-002-1 CPA Registered No.: 2893-2020-002-1 Hanoi, 31 May 2022 18 NORTHERN DELTA TRANSPORT DEVELOPMENT PROJECT Credit Agreement IDA No. 6028 - VN (Parts A and C) MANAGEMENT LETTER Fiscal year ended 31 December 2021 Hanoi, 31 May 2022 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 2021. 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, Person in-charge 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 w th you again soon, and in providing you with the required assistance, if any, in your future endeavors. Yours sincerely, Do IVanh CuIOng Deputy General Director T:(84) 24 3824 1990 1 F:(84) 24 3825 3973 I 1 Le PhUng Hieu, Hanoi, Vietnam AASCAUDITING FIRM 19 Northern Delta Transport Development Project Financial Statements Credit Agreement IDA No. 6028 - VN (Parts A and C) Year ended 31 December 2021 CONTENT 1. Project im plem entation and disbursem ent progress..............................o..2.................. ............... 21 20 Northern Delta Transport Development Project Financial Statements Credit Agreement IDA No. 6028 - VN (Parts A and C) Year ended 31 December 2021 1. Project implementation and disbursement progress Observation and Implication As at 31 December 2021, the Project's disbursement rate of the WB fund was much lower than the total investment while the credit will be closed on 30 June 2022: Accumulated disbursement Total investment up to 31/12/2021 Proportion USD USD % The WB fund 78,740,000 11,422,963 14.51 78,740,000 11,422,963 14.51 We were advised that due to the quotations of all bids participated in bidding packages CV-A2.6, CV-A2.7 and CV-A2.8 exceeding the approved price, the PMU must cancel the bidding packages and re-bid. Therefore, the bidding time of those packages was extended and affected the Project's implementation and disbursement progress. In addition, due to the impact of the Covid- 19 pandemic then Hanoi City and Nam Dinh province applied social isolation from July 2021 to November 2021, along with the impact of heavy rain and landslide at construction site, which also affected the progress of the Project. Recommendation We recommend the PMU should closely monitor the Project's progress to promptly address causes of delay in disbursement process. In addition, the PMU should work with competent authorities and the World Bank to timely provide solutions in case the Project cannot be completed by 30 June 2022. The PMU's response Agree with the auditors' opinion. 21