• Financial Attest Audit Report on the Accounts of the Sindh Public Sector Management Reform Project, Finance Department, Government of Sindh, IDA Credit No. 55840-PK 4 for the Financial Year 2020-2021, Auditor-General of Pakistan PREFACE The Auditor General conducts audits subject to Article 169 and 170 of the Constitution of the Islamic Republic of Pakistan 1973, read with section 8 and 12 of the Auditor General's (Functions, Powers and Terms and Conditions of Service) Ordinance 2001. The Audit of Sindh Public Sector Management Reforms Project (SPSMRP), Karachi IDA Credit# 55840-PK was carried out accordingly. The Directorate General of Audit Sindh conducted audit of Sindh Public Sector Management Reforms Project (SPSMRP), Karachi IDA Credit # 55840-PK during September & October 2021 for the financial year 2020-21 with a view to repo11 significant findings to the stakeholders. Audit examined the economy, efficiency, and effectiveness aspects of Sindh Public Sector Management Reform Project (SPSMRP), Karachi World Bank Assisted Project loan agreement IDA Credit# 55840-PK. In addition, Audit also assessed, on test check basis, whether the management complied with applicable laws, rules, and regulations in managing the Sindh Public Sector Management Reform Project (SPSMRP), Karachi. The Audit Report indicates specific actions that, if taken, will help the management ' to realize the objectives of the Sindh Public Sector Management Reform Project (SPSMRP), Karachi. The observations included in this report have been finalized in the light of discussions in the Exit Conference . • The Report consists of two parts. Part-I contains Auditor's Report (Audit Opinion) and Financial Statements. Part-II contains Executive Summary, Management Letter, Audit Findings and recommendations. The Report has been prepared for submission to the International Development Association in terms of Loan Agreement IDA Credit# 55840-PK. Dated: Place: Direct r e ral Abbreviations and Acronyms AFS Annual Financial Statements AG Accountant General AGP Auditor General of Pakistan BOR Board of Revenue CPS Country Pa11nership Strategy DAO District Accounts Officer DLI Disbursement Linked Indicators EAD Economic Affair Division ERP Enterprise Resource Planning EEP Eligible Expenditure Programs EU European Union FD Finance Department FO Field Officer FY Financial Year GOS Government of Sindh GRM Grievance Redress Mechanism !SSA! International Standards of Supreme Audit Institutions IT Information Technology JPSAS International Public-Sector Accounting Standards • JUFRs Interim Unaudited Financial Reports IDA International Development Association .;/ M&EC Monitoring and Evaluation Consultants MIS Management Information System OFWM On Fann Water Management . O&M Operation & Maintenance PD Project Director PSM Public Sector management PAD Project Appraisal Document POMA Provincial Disaster Management Authority PJU Project Implementation Unit PSC Project Steering Committee PSIAC Project Supervision and Implementation Assistance Consultants PFM Public Financial Management PBB Performance Based Budgeting SPSMRP Sindh Public Sector Management Reforms Project SRB Sindh Revenue Board SSC Supply & Services Companies STS Sales Tax on Services SPPRA Sindh Public Procurement Regulation Authority TA Technical Assistance USO United State Dollar WB World Bank II • TABLE OF CONTENTS Page No. Preface List of Abbreviations II PART-I Project Overview 02 Auditor's report to the Management (Audit Opinion) 03 Financial Statements 04-21 PART-II I MANAGEMENT LETTER 23 EXECUTIVE SUMMARY 24 I. INTRODUCTION 25-26 • 2, AUDIT OBJECTIVES 27 3 . AUDIT SCOPE AND METHODOLOGY 27 •• 4. AUDIT FINDINGS AND RECOMMENDATIONS 28 4.1 Organization and Management 28-31 4.2 Financial management 31-32 4.3 Procurement and Contract Management 32-33 4.4 Monitoring and Evaluation 33 4.5 Assets Management 34.35 4.6 Compliance with Grant/ Loan covenants 35-36 4.7 Follow up of prior audit recommendations 36 5. CONCLUSION 37 ACKNOWLEDGEMENT 38 ANNEXURES 39 • PART-I I. PROJECT OVERVIEW 2. AUDITOR'S REPORT TO THE MANAGEMENT 3. FINANCIAL STATEMENTS • • PROJECT OVERVIEW Name of Project Sindh Public Sector Management Reform Project (SPSMRP) Sponsoring Authority The World Bank (IDA)/Government of S111dh Executive Authority Government of Sindh Credit No IDA Credit# 5584-PK Project/Loan Amount $ 50 Million Date of Commencement 11 1h March, 2015 Actual Date of Commencement 11 11, March, 2015 • Date of Completion (PAD) 31 st August, 2020 Loan Closing Date 28 1h February, 2021 Disbursement Status in FY 2020-21 Component-I in Provincial Account-I Nil Loan Status in FY 2020-21 for Component-II (TA Expenditures Incurred PKR 405 Million ERU+3 l 5 Million SRB Component) Total Expenditure PKR 720 Million (US$ 4.5 Million) Eligible Expenditure Program (EEP) till FY 2020- World Bank Share: US$ 37.9 Million (PKR 4,525 Million) 21 in Component-] GoS Shares: US$ 195.6 Mil!ion (PKR 30,963 Million) Total· US$ 233.5 Million (PKR 36,968 Million) 2 AUDITOR'S REPORT TO THE MANAGEMENT We have audited the financial statements of Sindh Public Secctor Management Reforms Project, Karachi that comprises of Statement of Receipts and Payments, Statement of Comparison of Budget and Actual together with the notes fonning part thereof for the year ended 30th June, 2021. These financial statements are responsibility of the Government. My responsibility is to express an opinion on these financial statements based on my audit in Pakistan read with Section 7 of the Auditor-General's (Functions, Powers and Terms and Conditions of Service) Ordinance 2001. I conducted my audit in accordance with the auditing standards issued by the International Organization of Supreme Audit Institutions and by my Department. Those standards require that I plan and perform an audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Government, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion. In my opinion: (a) The financial statements present fairly, in all material respects, the financial position of the 1- Sindh Public Sector Management Reforms Project, Karachi as on 30th June, 2021 and the results of its operations, its cash flows and its expenditure and receipts by appropriation for the year ended in accordance with the stated accounting policies of the Government of Pakistan. (b) The expenditure has been incurred in accordance with the requirements of legal agreements. Dated: -12-2021 Place: Karachi • G,.ve1111m:11l l1fSint No .•. rnl40--PK PIW.JF.CT ovrnvmw Nm1wof P111jcc1 Simlt1 l'uhlic Sldur Maru1gcnic.nl Rcfonn Projccl (Sl'SMRP J S1i.:,111ori11!,'. Au1h<1rily Tlw Wc.rld llm1~ (ID,".)IG-a,·c-rr:111en1 nfSindh • E~ttllli,~ .'\uU10,l[y Govcmmt:nl of S111dh Ci\xlit No lfJ,\ Crc.dit # 55114-l'K l'rujt'cVlo:t11 A111ounl $ SO Million • D:ue ofC01111nence111-,nl ll'''March,201~ Acn.rnl Dm~ ofCummcnctmem 11 '1 ' Man:b, 20 I:5 Dmc ofCcimp!etion (PAO) J \'' i\llt'.11>1, 20'2(1 LO!in Ck1~i11g O111e 28'" Fchm.11ry. 202 J DisbLm,t•111ent Sltltu> io FY 2020-2 l Compont111-I in Pr,wincial Account-I UJ:m S111.1u> ill FY 2020-21 for [.~p~nditurcs lllCllrreJ:l f'Krl 405 Millii>ll ERU+ f'KR) l S Compo~ent-11 (T,\ COll)JKlfl~~ll) Mill/011 SIU} Tntal Expcndimr~ l'KR T2tl !v1111io1, {US.'$ 4.5 Million) [:li~ibk Expc:1idih1r~ Pri:.gr.1111 (EE!') till Wnrld flm1I: Sh111~: \IS:j; 37.9 r,,1illio11 (l'KR -1_5:?.5 Million) f'Y 2(J20-2 I ir, Cornpil!\t:nl -1 Gi1S Slnm:s: US$ 195.G Mill;m, (l'KI{ 30,%3 l>.·tillionJ Tolnl: USS 2D.S lvlillion ll'KR J(1,(Jl\8 1'vli1iinn) A ·U~},-..1°•,~1.1~"~7l1t!l k r·1rn ~r l~~-\OI- j u.fl\\'.I. :I, """" ' 5 .< :-.·' 11 1'111\1 ll' ~["( • 11 ll~ ,\I •\N \( 11· ~1rN I I( I f't ll(/. 1 ]'la )JI'\')' 1 1 I i11.111,,· \ l.-!',utrn,111. r ;,,1,·111111n', ,,i' :,:i1hlh IP.\ t ·11.,1i1 '/., ,,~.111-1'• ,,i, )(r\'r1[' ' ,\. f'~)iil<'i1I., ftn· till' l\•1,,.,i r1ul1'II 1111 ,ltl"',illlU,- !Ll! l, 1 l'id, ,11, \l,\i,,•n·,' ,,,,1 'I ·,111 .. il.11, 1,. 11,-.::11'1 • !'.11 u .. ·,il, l·,~•11,,il(,i j,, 1:l'(Tli'\. I.'. t.'11 ·'•<'L 1EllU\. r;.,,i>:rt1-tr1"-'"'" Co"""'~n! ol Sl11olTI i'.,s" ,. Is 6 Gov~mrncnt ofSindh r:1,L~ncc Dcr~nu,~n, tEcnn(,mi~ lkfrmn Uni!) S!NDll ruriuc SECTOR .MANAGEMENT REFORM PROJECT Fi111mcc D,p;in111cn1, Go1•cmmc11t of Sindl1 mA Crc ~47 ... 11 Tul,nfral Assi,,~.,t< . :l00.15 . . . . . . Onodi )5j59 C<1ul-11lli11t lM.38 . $cr,·,c~i 8!.92<) NoJ:1•Ctmsullin.t: . . ·-- . --- . . . Sen1lces 2.725 . . 2ll.S5 . . . -- Trai11imr 12.487 . . . !ncr~m~nt~I On~mlir,~ C11 SJNDli Ptll:ILIC' S[;CTOll MANAGEMENT R 1-'Hll{M PRUJECT Fii1~ncc Dc11::r l111cll\. Ouv~mmcnt of ::;in.lb FLtnc!cl (NAM). In DC\:cfllh"r 2000, Auditor Gc11cr~l (Jf l'akil\llll prescribed NAM wilh \he apprnvril of th~ rrc,~irli.'r,1 (;f P~ki~t~n mic:kr ,1,,r11d~ l 70 of tl:c Constitu1ion or 1~1~m;,, Republic: of r,iki~uin :md !hi, imp l~m-e.11w1iou of NAr-,i is tt11 onr,(, lng fll'Ol.'..CSS. 4, ACCOUN11NG CONVENTION AND IIASIS U)I J'IlEl',\TtATJON Thc~c fm~11cial s1.1tcmcnl~ have bl-en prcp;ued und~-r the c/~~h \mii~ of accol.lnling which • r«:oguizcs tr!ll'lS:!Ctlons 1md cve11ls 011ly whe11 (..'Ml1 i$ received or p~ic11li11g rcCLJ\'cry of imy prcvlllus owrp1tymen! :,re adju.s(eu bt"•1cfits from goo~ and ~er.1 ice.s pmd1r,sed on us bchalt" ~~ a rc~ull of cash paymenL~ made by (he thi,d p by 1hinl lltmic~ cohunn on the fnce of ,it.nt~rne:111 of c.nsh receipts and payme:nli nrn:I notes to U,c fjmnKial s(;ilcmo;'.nl~. 8. !'Ro.mer on.TF.CTIVE ANTI DESCRIPTIONS The objectiw, of lh~ l'Tl~ccl i~ ltt E!Jcugthtn public s~cwr f)Crfocm~rn:.,; 1n llie pmvini:c of Simlh throui::h improved tt"vt'm1e gcm.-mticm 1U1tl expenditure m~u~gcmcn1. The 1'1oj~cl Objectives consist oftl1e following: II Govcmmcnl 0J'Si11dh l'in.111t~ fkpartrncm (J;cunwmk Reform Um!) SINDJ I PUBJ IC S''CTO ~ ~ R /.·lANAGEI ..IENT REFOrtM PROJECT l'1nc1m;c Dcpn11rnrnl, Go~crnrncn1 of.Sin'C ns input lo prcp.uc ln.r,gc-~c~k: lllxp11ycrcducu!icm r protrrit11s, (f) couJm:c, , G]S fi 1 tll.L, 1 ng nmI s~lcl I'Ile 1mogm,, · · • nn~lys1s for propcny 1:1:,: ~nd other 111x :~ ~~; (g) COn~Uciing i~gul.tr 1.1X JJ:1ycr cmmn11nic~tion, cd11c11tion 1mJ focililntion nc1!111lic,:; Sll~P(l_r1ing o~het oll,-> und scmlirnr~ (c) ,11pportini:; dcht mnnngcmcnt; (f) a.1sct recorliint:, i1ih:rnal cl1nlrt1I, uml CXffttidimni cu1111·11itm~ul wntrnl; U:l payroll and pension euUit~; (hJ mct1i;;1hening public 11ccounts conuniucco; and {i) ~lrc.71gtht..'Tling citizen eng~geme11l ~nd iuformation disclo~uh': prnclicts. Suppnrr tu implcm<'U!utl1rn uf prnrnrcnumt reform~, iDcluding {11) developing and impl~mentiug the c-procurcmcnt a11d 11-IIS plans by idclllifying re-quired ch.,ngcs for the n~w rnchnology to b.i dfoctivc; (b) pu.m1c1ina,: with higher cducution in.~titulion~ and sp~ci:1liz~d !1 ainjng ins1iiution.s io du11elop tf!lining nio.:hi!cs which cover the '1111 nmge of co11,-,;,es th.iii urc required for huildl!1g procurcmt11\ Jklll~ ofprocurt:-menl offi~iub mul; (c) rnppo1·ti11g SPl'llA ir1 dcvdopiug their own Cll]Hl.city nnd strnngrhMittg their regl1.l~IL>ry frumcwork (implementing rcgulntions, contrnct m11nugcmc11t J;Uideline, etc). Se,irm"'d with C~n,Sc,-,n.-.~r 12 Go,'cr11m~n1 of Sindh Hn~11cc Dcr~r1mcn1 (Ccon"m1l· ltclorm Unit) S!NDJ I l'UflLIC SEGfOR lv1ANAGEJ1.,1ENT RHOR\1 PltOJJ.:CT Fl11ancr Dcp11nmcnt, Govemmcnl ofSindh !DA Crcdi1 No. 558..\0.t'K l'rojc-c-t Componl'nts The Prnject co11si~l.!i or two cm11plemcnu1ry components: (i) rcsl1h$·b:1st:d finandn'i! lla~cd on DLh to provide aa inccnhvr for achieving clig1'hk public St'Clor man.1i;crncnt ("PSJl.·1") rcfonns (US$ 40 million), und (ii) t~chnicnl as~istnncc 10 support 11c1ivitie~ for achieving DL!s (USS 10 mil\ion).Rcsull~-based fimu1cin£ will disburse ogairl$\ agreed eligible e1:pendituic program (EEP.:} based on DLI& in four 1eform ur('lls: incrcnsing tux rcvcrn1c • rnobiliZ11tinn; enhancing perfurm;mcc of p11blk financial man~grmcnt ~ys1crn: $\ft!ngthcninfl pul:ilic procurement pcrfom1011ce, and improvi11g 1m,nagcmcnt of the ck:vc:lopnicnt p1mfolio. • Compl'lmm! 1: nc~ult,-1:i:nc.lENT LINKINDJC\TORS (DLis} S. No lndku(or Name Deu:rlpthm (1udiculon Definltlon) Approval nii" !U'"' S~u(,'t- ' ~.p-,i>IL -- f ,r,1~0 ~~~. fln1ri~e0t~ti1 Pa1.l<1 • 'R,11Ctlffl \}fl\\ }--v°"- {f(.,o Scar,n,-d w,th C.amSr:u11r,n 15 Ovv..:rnmcnt r,f Sin,1h ri11a11cc ll<:p~11111en1 (l:Cllnomk llcfon11 lJnit) !-:IN\)1-1 fllJBUC Sl.:ClOR MANAGEMl,'.)ff REFORM PROJECT 11. ELIGIBLE. l;'_X\'F.NlllTURE PllOGRAi\lS Budget Gnint Ohjrct C'nclt' ,'it. F11uctio11 r'oc,. De~criptio11 lki·criplion • Adminis1n11ion of fiMnd:il Affair~, Tax M1J1la~cment f Fimmcc 011204 (CtJ~toms. I (includi11g ADI f:rnp!oy~cs. DI 120.'i lm;(m1,;Tax. Sindh f(~\'""lll!e SC21106 011206 I I Bo:ml) Rd~tcd Expc-o.es 011207 Exd:.e). Accouming • Scr\'iCCI, Aud icing Scrvi.::c~ F f'lo.nmflg & 015201 Pl,m11in!I,. AOI l)cvclop1m:nc 01."iJOI Stuti31ics. 1 ErnPloyct~ {in.c!L1dill]! 01110•1 At1rd of Empl{lyecs (Custom, lncomt: Revenue SC2l 114 Reln1t·d Expense;; 011:rns Tax. E:sciscl n, [)]SDURSEM£NT CONDITIONS AND SCHEDULE 16 Go\u11m"•1 afS-intlh Fiuance Dqianmc:Hl {f-:.c imd the unit DLI price. Whtit 11chicvcmcnl of a DU cannot bot: c~rtilic1I, 11n .rmo,1111 equivalent II) the 1mit DLl price will he wilhhdd. This amount will be p,1id 11( miy later date whch rnd1 uchicvcmcnl can be verified In c1L.c of parliutly met DLl, ll proportirm of lhut Dl,1 wolll(I he rnmid~rcd m~·L oml remaining W(>Uld lie curried forward The reirnhL!rtcmcnt 1kpcnd, 1-'•l 1hc 1wu rac1or~, fir~I lh~ nchievc111cn1 ,ifDLl tllld !k:coni.l is the EET's. 13. Sl'Si\!RI' COST ANP F1NANCING!LOAN DY WA ANTl EUROPEAN COMMISSION us, /ln Mllllnnl F1n1incl~! Cn111poncnls Pcrccutni;:e (%,) • Slndh Govcrnnmlt 220 78% IDA 50 ]~% Eurup.:.u1 Commi~sion (f&:lmkal Gran1)• 12 4% 1'otal '" 100'% - 1s a non•monciILI)' tcdio1cul l~TT111I .u1d dci.cs not 11wolw· an)' ~European Comrn1sswn (EC) firunci11I tr.:irufcr,;. US:S In Million Allocntion orLo~n Amount (C1H~gury) Amotmt uflonu PL'rCl'Ol~ll,~ (%) Eliglblo Expenditu~ l'rogrums Teclinic.il AsSi$ltl.1lCC SlO 20% To!:11 sso 100% 17 r;,w,:,.~,!lt'!l! 'Cf OC:!!l~h l'in~nl-.: Uqi~rtn,_..,ll !Ec11111!mk llefurrn lJuil) S!NDJ] runuc SECTOR MANAOEMENT IWFOHM PROJECT Finnncc Dcpar11hi:nt, Govcmmcnl of Sincll1 " 13.\ DLI Cnst p~rYe:u· (USS in M111ions) FY VY liY FY FY S.Nn DLI 2014- 20J5. 201 (1- 2017- 20111- TOT,\L • 1; 16 17 18 I ~J Apprnv.'.11 and initial implcmcnt~tioa of I. Sindh ·r:ix R.evl'!nuc l,fohili1.i1ticin JO 10 Reform Plun Erih:im:ccl SRB bum.in rcso11r~t:s 2 l U•.5 0 l 1.5 5 cllp.tcity for udministm1ion • lncn:ascd ~uiom111ion of SRD 0.5 l 2 6 J. ' 0.5 Risk b~~cJ audit-> oft:rx~i;,cr> 4. l 0 0 I l J impicmcntc:n_,) l'ln:inccd lly Workl 1,21)9 t,J99 Onnk rin~ncc,! by • Oovc111ml.'n1 or Sindh 7,172 5.i~s ll,420 To111I 1:11iuudn~ 7,172 6,~..i, 0,719 14.l The ~h:irc of0o\'crnmcn1 of Sindhi~ nrrivc,1 :11 ntkr summing rill the cxpcmliwrc incurred mid then dcduc1i11g fiam \he fun,15 rccci\·cd fo1111 IDA 14.2 No TA Finoncing wa.1 1cccivcd from IDJ\ during 11w n:p.:,ni11g Jimmciul yci1r from WB. 15. WJTHDIUWALSCHEDULE OF [l)A comr.om'ni l WUhdr11wal Ap11Ik11lio11 Applk~tion Typ, N, . • 19 • Go,•i.,rnmcnl ofSiml\i Fi11;11Kc l>~parun~llt (faonom,c Rd,mn U1ii1J SlNDJ-1 PURI:!<..~ SECTOll MANAGEMENT RErORM PROJl.:CT Pmn11cc D.:-_par\m~-nt, Govcrrmic111 of Simlh H1 , , lDA CrcLlit N(l 55840•1'K · lsli!!lhk Exp~11dit11rc Pro~rnm LJc:l:1ih . A111m111t !n Mlllirius l'nrtil:ulnn; Aclu~\ I!.l"ni.,ndllurcs Fintmcc: (inchali11g SllB1 1,'J93 Plaunin1< & Dcvcl1)nmcn1 (foc\udin~ SPPIU\.l J!.16 fo:clse & Tn:u1tion .. 1,721 Bo~rd ofRevenu~ l,6t17 Total \1n . . \7. NO Tt\ Financing wus rt-.:eived from IDA during the rcp(irlin!;!: !iim11ci11l year from Wl:l Howevc:r, It') complete th,; actlvilic-;· TA \WL~ p fovide-0 by finance D~·panmcm, GoS. 18, Expct1dllul'l'l 1mder TA C(► nljlUUClll Ex1)mditurcs lnc1mcd By ERU, FD \111mtnl in Rutice~ ' .. Yi.-i:ir zo-20-2011 . 2019-:?lll\l --· s~luries 19750584 30,624,620 Consultancies ~4,till.2~K 51,303-973 Trninln.,. w,~45,437. l2 1\86 914 Gornfg l80,l~S,113 35 559,214 Reimhllfscmcnt . 2725331 sui/.rot11I 405,372,442 1327001}1 ~ 9l1 I.JI, 1 -:'., S _,,otll~ 1,),t "' '' '' \\i\lr,~t '(.'jl,.\,)\ 20 (;ovnn11,etJI c,F~i"tlh F1na,sc,,: Dcp:iurncr>t (l:.conomic ltd"o,.,1 UnilJ SfNDI! PUIJ~JC SECTOR MAN,\GEMENT RErGRM PROJECT hn:lllcc Dcr:inmcnl, Govcrnme11t of Sim.lb 18, F.xpcntli1,,,, ,,, 111 .1.A . er Compo11cnt ofSRIJ ---- .. Amount In lhincr, \mm 1 1 lu • " l{une~~ Year 202(!-21 20\'J-20'.!U -·-· Salnrics/Crn,snlt~ ncy 2.1,42'\!2?-00 21,429,153.00 Trainin~/Ca rnci"· nuildin, , . ,. .. 15 273 f.~~-- GnodE 29.',,574 IIBS.r>O 59,6}(, IO_j_ _ Sub Tura\ ]15,0IJ;J 041 ·--- ')J,141110 19. EXPl-:NIJITUIU:S TRACl..:JNG JI.ND !IIONITOIUNG The cxpchdi!urc .1lrnll he trocked llfluc. 21. GENEHAL (i) Levt>/ of P1·cdslon figures in tllcsc firn1mfal sw.!cmcnls have bccll rmtm:lcd offtc, 1hc 11.::1 unle~s 01herwise stJtcd, I;, ,:;../ (S:1f111 An 1 r hrnn) Din.:ctor Economic Rcfonll Unil Pinnncc Ocpnrtme111 Uovc-rnmcn1 of Si11dh SAflA AAMIR ISRAN) ~lite\tr. Eccn,mk R1to1m Un11. Fln3nce o,partmtnl r.,,~~rnmi!\I of :!,lndh Scannr.-d \\'1th CamScann~r • 21