• FINANCIAL ATTEST AUDIT REPORT ON THE ACCOUNTS OF PUNJAB EDUCATION SECTOR PROJECT -III FINANCED BY WORLD BANK & DFID (CREDIT NO,.86200-PK, GRANT NO. 202697) PLANNING AND DEVELOPMENT BOARD, GOVERNMENT OF THE PUNJAB For The Financial Year 2020-21 AUDITOR GENERAL OF PAKISTAN ISLAMABAD ' ' > ,, • TABLE OF CONTENTS Page Abbreviations and Acronyms 2 Preface 3 PART-I 4 Project Overview 5 Auditor's Report to the Management (Audit Opinion) 6 Financial Statements 7 PART-II 8 COVERING LETTER TO THE MANAGEMENT 9 EXECUTIVE SUMMARY 10-11 MANAGEMENT LETTER 12 1. Introduction 13 2. Audit Objectives 13 3. Audit Scope and Methodology 13 4. AUDIT FINDINGS AND RECOMMENDATIONS 13-37 4.1 Financial Management 4.2 Overall Assessment 38 5. CONCLUSION 39 ACKNOWLEDGEMENT 40 ANNEXURES 41 • 1 • Abbreviations and Acronyms CEO Chief Executive Officer DDO Drawing and Disbursing Officer DEA District Education Authority DFID Department for International Development DL!s Disbursement Linked Indicators DMO District Monitoring Authority ECNEC Executive Committee of the National Economic Council FTBs Free text books FD Finance Department GoPb Government of the Punjab GST General Sales Tax IPSAS International Public sector Accounting Standards MTDF Medium Term Development Framework NSB Non-Salary Budget PESRP Punjab Education Sector Reforms Program • PFR Punjab Financial Rules PMIU Project Management and Implementation Unit PPRA Punjab Procurement Regulatory Authority PST Punjab Sales Tax SDA Special Drawing Account SIS School Information System 2 PREFACE • The Department of Auditor General of Pakistan conducts audit, subject to Articles 169 and 170(2) of the Constitution of the Islamic Republic of Pakistan, I 973, read with Sections 7, 8 & I 2 of the Auditor General's (Functions, Powers and Terms & Conditions of Service) Ordinance, 2001. Audit of Financial Statements of the "Punjab Education Sector Program-III" financed by Government of the Punjab and the World Bank for the financial year 2020-21 was carried out accordingly. The Directorate General Audit, Punjab Lahore conducted audit of the PESP-III during July, 2021 for the financial year 2020-2 I with a view to report significant findings to the stakeholders i.e. World Bank and Government of the Punjab. Audit examined the economy, efficiency and effectiveness aspects of the Program. In addition, audit also assessed, on test check basis, whether the management complied with applicable laws, rules and regulations in managing the Program. The audit report indicates specific actions that, if taken, will help the management realize the objectives of the Program. The report was discussed with the Program Management in August, 2021. The report consists of two parts i.e. Part-I contains Auditor's Report (Audit Opinion) and • Financial Statements and Part-II consists of Executive Summary, Management Letter and Audit Findings. The report has been prepared for submission to the World Bank m terms of Loan Agreement. Date: (Moh a aq Place: Lahore. Director General Audit, Punjab Lahore 3 • PART-I 1- PROJECT OVERVIEW 2- AUDITOR'S REPORT TO THE MANAGEMENT 3- FINANCIAL STATEMENTS • 4 • PROJECT OVERVIEW Name of the Project/Program: Third Punjab Education Sector Project(PESP-111) Sponsoring Authority: World Bank and DFID Executing Authority: Program Management and Implementation Unit (PMIU), PESRP-III. Credit No. 86200-PK Grant No. 202697 Date of Commencement: 01.09.2016 • Date of Completion (as per PAD) 31.12.2021 Date of Closing of Loan Agreement (PESP-III) 31.12.2021 (Rs. in thousand) Amount utilized Amount utilized during during 2019-20 2020-21 287,729,623 294,681.696 5 AUDITOR'S REPORT TO THE MANAGEMENT • Auditor's Report on PESP-111 Financial Statements We have audited the accompanying Financial Statements of Punjab Education Sector Project-III that comprises of Statement of Receipts and Payments, Statement of Comparison of Budget and Actual together with the notes forming part thereof for the year ended 30th Jm1e, 2021. Management's Responsibility It is the responsibility of Program Management to establish and maintain a system of internal control, and prepare and present the Statement of Receipts and Payments in conformity with the requirements of Cash Basis International Standards of Supreme Audit Institutions (IPSAS), Financial Reporting under the Cash Basis of Accounting Standard. 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 IPSAS. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the Financial Statements are free of material misstatements or not. The audit process includes, examining on a test 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 present fairly, in all material respects, the cash receipts and payments by the Program for the year ended 30th June, 2021 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 the legal agreement. Place: Lahore Date: Director Genera] Audit Punjab Lahore 6 • FINANCIAL STATEMENTS FOR THE YEAR ENDED ON 30"'JUNE, 2021 • 7 Third Punjab Education Sector Project (PESP-111) Receipts & Payments Against Financing Sources (Donors & GoPb) Statement of Cash Flows • For the year ended June 30, 2021 Own Source Donors Total Description Notes IGoPbl US$ GBP Rs. in '000' Rs. in '000' Rs. in '000' I Opening Balance 3.0 637,975 98,008 98,008 RECEIPTS 4.0 - - GoPb Receipts 4.2 - - 284,388,793 284,388,793 IBRD Credit 4.1.3 39,940,329 6,295,604 - 6.295,604 Direct Payment by IBRD 4.1.2 1,651,541 - 261,308 - 261,308 Gr,int from DFID 8.0 - 19,199,599 3,948,888 - 3,948,888 Total 42,229,845 19,199,599 10,603,808 284,388,793 294,992,601 PAYMENTS 5.0 - - - From GoPb allocation S.2 - - 284,388,793 284,388,793 Payment from Donors S.l 40,452,084 6,376,788 6,376,788 Financing Direct Payment by IBRD S.l 1,651,541 261,308 261,308 From DFID grant 8.0 - 17,818,245 3,654,807 - 3,654,807 • Total 42,103,625 17,818,245 10,292,903 284,388,793 294,681,696 surrender/lapsed/ Balance from DFID <>rant 8.0 - 1,381,354 294,081 - 294,081 Amount surrendered from - - - - GoPb Amount lapsed from GoPb - - Increase/decrease in cash - - due to exchange rate Closing Balance 6.0 126,220 - 16,824 - r 16,824 \JYY\9il ~ le. / / V'--cf, FINANCIAL MANAGEMENT SPECIALIST PROGRAMME DIRECTOR I FINANCIAL REPORTING UNDER CASH BASIS OF ACCOUNTING GOVERNMENT ENTITY • Statement of Receipts and Payments Third Punjab Education Sector Project (PESP-111) For the year ended June 30, 2021 Rs in OOOs Rs in 000s 2020-21 2019-20 Receipts/ Receipts/ Payments by Payments by Description Notes (Payments) (Payments) uternal third Total external third Total controlled by controlled by parties parties entl.,, entitv Receipts of Go Pb 4.2 284,388,793 284,388,793 277,872,792 277,872,792 Direct Payment 4.1.2 261,308 261,308 189,432 189,432 Receipts from IBRD 4.1.3 6,295,604 . 6,295,604 7,357,308 7,357,308 Grant from DFID 8.0 3,948,888 3,948,888 4,365,394 4,365,394 RECEIPTS 4.0 294,894,593 . 294,894,593 289,784,926 . 289,784,926 From GoPb share 5.2 284,388,793 284,388,793 277,872,792 277,872.792 From IBRO Credit 5.1 6,376,788 6,376,788 7,334,345 7,334,345 Direct Payment 5.1 261,308 261,308 189,432 189,432 From DFID grant 8.0 3,654,807 3,654,807 2,333,054 2,333,054 PAYMENTS 5.0 294,681,696 . 294,681,696 287,729,623 . 287,729,623 Ji:::rrer d11r.'lapsed/Bal 8.0 294,081 294,081 2,032,340 2,032,340 from DFIO ~rant Cash at beginning of ye~r ,.o 98,008 98,008 75,045 75,045 lncrease/lOecrease) 111 Cash due to exchange rate Cash at end of year 6.0 16,824 . 16,824 98,008 . 98,008 FINANCIAL MANAGEMENT SPECIALIST PRO R A M M E « ~ FINANCIAL STATEMENT FOR THE YEAR 2020-21 Third Punjab Education Sector Project (PESP-111) Statement of Comparison of Allocated and Actual Amounts For the year ended June 30, 2021 • Rs in OOOs Rs in 000s I . Components 2020-21 2019-20 I Allo(ated Amounts Revised Amount Actual Amounts Allocated Amounts Revised Amount Actual Amounts Comnonent - I Solar" Related Ex"enses 298 393 000 270,194 536 257,178,775 293,392,579 270,394,924 258,789,516 Pun'ab Education Foundation 1PEF1 18,029,448 18,029,448 15.787,486 17,988.760 17,988,760 17,755,511 Girls Stipends 5,531,751 6,128,248 6,125 194 5,265 000 4,250,000 Monitoring Systems (CM Monitoring forcel 644,587 423,242 301,160 651,032 347,798 338,854 Non-Salary Bud el 0 11,158,750 11,158,750 11,084 644 11,900,000 9,675,000 8,305,831 Total 333 7S7 536 305,934,224 290477.259 330,197,371 302,656,482 285,189,713 Comnonenl. II Incremental TA Staffin~ 61 236 107,329 106,247 80,400 90,235 81,329 • ca~acity Bu,ldin" (A03982' 287,044 250 559 182,075 236,250 223 582 34,103 Expenditure Track1n~1 TPVs 40,500 7,594 34,650 • Direct Pa"ment b., World bank 261,308 261,308 261,308 189,432 189,432 189 432 ' Total 650,088 626,790 549 630 540 732 503,249 304,864 DFID rant 3,948,888 3 948 888 3,654,807 . . . Grand Total 338,356,512 310 S09,902 294,681,696 330,738,103 303,159,731 285,494,577 ~i ~ FINANCIAL MANAGEMENT SPECIALIST '-.'ftCOGFIJ(iiM,-ME DIRECTOR / Programme Monitoring & Implementation Unit Third Pun.jab Education Sector Project (PESP-1ll) School Education Department Government of the Punjab Notes to the Financial Statements for the year ended ,June 30, 2021 I. Administrative structure of Punjab Education Sector Reform Programme (PESRP) As of 30th June 2021 three projects are operated under the umberlla of PESRP. Details as under: Projects Donor Audit of2020-21 Third Punjab Education Sector l'roject (l'ESP-111) World Bank Conducted by D.G.Audit Punjab rwm Grant DFID Concluded by D.G.Audit l'uniah Punjab I luman Capital Investment Proiect (P! !CIP) World Bank Conducted by D.G.Audit l'unjah rhc scope ofth1s audit 1s the world bank funded proJect PESP-111. I.I Project Description (PESP-111) The Punjab Government has entered into a Project Agreement ,vith International Hank for Reconstruction and Development (IBRD) dated August 31, 2016 bearing l.oan No.86200-PK in connection with the Loan Agreement of the same dale between the Government of Pakistan and the IBRD for financing Third Punjab Education Sector Project (PESP-111), cost amounting to US$ 13,357.50 million for a period of rive years. l'ESP-111 has two components: (i) a result based Component 1- lo finance PESP-111, amounting to USD 277.89 million (ii) Component 2 Technical Assistance (TA) component-to finance essential advisory, technical and capacity building support for PESP-111. amounting to USD 21.36 million. The Credit proceeds arc periodically disbursed on achievement of9 mutually agreed and equally-weighted Disbursement Linked Indicators (DL!s). The credit proceeds can only be utilized against selected budget heads ofGoPb. These budget heads have been declared as Eligible Expenditure Programme (EEi's) by the donors. Eligible Expenditure Programme (EEPs) for PESP-111 comprise of - Salary related expenditure. Girls Stipends Program, NSB, Eligible expenditures incurred by PEF and CMMF. • 1.2 Project Objectives The Project's Development Objectives are to support the education sector refonn program of the Government of • Punjab with major goals of increased child school participation (at multiple level) and student achievements. It also aims to improve access, equity & quality and relevance of education in Punjab. J 1.3 Scope of the Project Scope of PESP-111 include provision of suppo1t to School Education Department and Gol'b by bridging the implcmcntaliQn gap and delivery mechanism. PESP-111 embraces the principles of increased transparency, participation and collaboration as essential to accomplish its mission, while spotlighting the parameters of access, quality and governance. 1.4 l(stimated Cost PESP-111 Partners USS (in million) IBRD 300.00 DFID 150.00 Provincial Govt. financing 12,907.50 Total 13-357.50 2 Significant Accounting Policies 2.1 Basis or 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 system-generated accounting records are the basis for preparation of these financial statements which an: in conformity with International Public Sector Accounting Standards (IPSAS) issued by the Public Sector Commillee of the International Federation of Accountants. Accounting records are maintained using the government-wide integratc