Social Assistance System Strengthening Project (Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA')) Financial statements For the year ended 31 December 2019 g Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') CONTENTS Pages Report of Project Management Unit 1-2 T Independent auditor's report on the financial statements 3-4 Statement of off-budget assets, liabilities and fund balance 5 A Statement of off-budget income and expenditure 6 Statement of off-budget sources and uses of funds 7 Statement of off-budget designated accounts 8 Statement of off-budget withdrawals 9 Statement of on-budget sources and uses of funds 10 Statement of on-budget uses of funds detailed by province 11 Statement of on-budget foreign currency deposit account 12 Notes to the financial statements 13-24 Independent assurance report on compliance 25-26 Independent assurance report on effectiveness of internal control 27 - 28 Appendix 1: Management letter 1-14 g Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') REPORT OF PROJECT MANAGEMENT UNIT Project Management of Social Assistance System Strengthening Project (the "Project Management") presents this report and the financial statements of Social Assistance System Strengthening Project ("the Project") as at 31 December 2019 and for the year then ended. THE PROJECT MANAGEMENT'S RESPONSIBILITY IN RESPECT OF THE FINANCIAL STATEMENTS Project Management is responsible for the financial statements as at 31 December 2019 and for the year then ended which presents fairly: > assets, liabilities and fund balance as at 31 December 2019; > income and expenditure for the year ended 31 December 2019; N > balances of the designated account as at 31 December 2019 and the movements of this account for the year then ended; D> statements of expenditures for the year ended 31 December 2019; and > sources and uses of funds for the year ended 31 December 2019. In preparing these financial statements, Project Management is required to: > select suitable accounting policies and then apply them consistently in accordance with the Financing Agreement for Credit No. IDA 5354 - VN ("Financing Agreement") between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA"), the Project Operation Manual ("POM"), other applicable laws and regulations; t> state whether applicable accounting policies have been followed, subject to any material departures disclosed and explained in the financial statements; and > design and implement an effective internal control to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error. Project Management is responsible for ensuring that proper accounting records are kept, which disclose, with reasonable accuracy of assets, liabilities, funds balance, its income and expenses, and sources and uses of funds of the Project for the reporting period and accounting books compliance with POM. They are also responsible for safeguarding the assets of the Project and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Project Management confirms that they have complied with the above requirements in preparing the financial statements. g Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') REPORT OF PROJECT MANAGEMENT UNIT (continued) STATEMENT BY PROJECT MANAGEMENT Project Management does hereby state that, in its opinion: the accompanying financial statements give a true and fair view of the financial position of the Project as at 31 December 2019, the income and expenditure and sources and uses of funds for the year then ended in accordance with the accounting policies as described in Note 3 to the financial statements and POM; the funds provided by IDA and the Government of Vietnam are utilised for the purposes defined in the Financing Agreement; the Project complies with the Financing Agreement, POM, and other applicable laws and regulations; and the Project designs and implements an effective internal control to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error, as well as to ensure compliance with the Financing Agreement, POM, laws and regulations applicable to the Project. For and on behalf of Project Management Dang Kim Chung Project Director Hanoi, Vietnam 29 June 2020 2 Ernst & Young Vietnam Limited Tel: +84 24 38315100 8th Floor, CornerStone Building Fax: +84 24 3831 5090 16 Phan Chu Trinh Street ey.com B n aHoan Kiein District Builing a better Hanoi, S.R. of Vietnam Reference: 61430372121042058-HN INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS To: Project Management of the Social Assistance System Strengthening Project Opinion We have audited the financial statements of Social Assistance System Strengthening Project ("the Project"), as set out on pages 5 to 24, which comprise of the statement of off-budget assets, liabilities and fund balance as at 31 December 2019, the statement of off-budget income and expenditure, the statement of off-budget sources and uses of funds, the statement of off-budget designated account, the statement of off-budget withdrawals, the statement of on-budget sources and uses of funds, the statement of on-budget uses of funds detailed by province and the statement of on-budget foreign currency deposit account for the year ended 31 December 2019 and the notes to the financial statements, including a summary of significant accounting policies. In our opinion, the accompanying financial statements of the Project are prepared, in all material respects, in accordance with the accounting policies as described in Note 3 to the financial statements and Project Operation Manual ("POM"). Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISA). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Project in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the financial statements in Vietnam, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Emphasis of Matter- Accounting policies We draw attention to Note 3 to the financial statements, which describes the accounting policies. Our opinion is not modified in respect of this matter. Responsibilities of Project Management to the Financial Statements Project management is responsible for the preparation of these financial statements in accordance with the accounting policies as described in Note 3 to the financial statements and POM, and for such internal control as Project management determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error. 3 A ,br fEnt & Yo q GkLf:Irvt 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 ISA will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISA, we exercise professional judgment and maintain professional scepticism 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. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. We communicate with the Project management 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. For and on behalf of Ernst & Young Vietnam Limited Nguyen Thai Thanh Deputy General Director Audit Practising Registraitie tficate No. 0402-2018-004-1 Hanoi, Vietnam 29 June 2020 4 W g Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA") STATEMENT OF OFF-BUDGET ASSETS, LIABILITIES AND FUND BALANCE as at 31 December 2019 Currency: VND Beginning balance ITEMS Notes Ending balance (Restated) ASSETS Cash 4 16,584,695,133 16,547,209,331 Cash on hand 20,071,343 26,541,980 Cash in bank 16,564,623,790 16,520,667,351 Account receivables 411,599,579 9,935,135,848 Advances 5 149,703,694 9,596,425,518 Other receivables 261,080,085 336,603,010 Advances to employees 815,800 2,107,320 Fixed assets 31,857,097,733 4,744,510,299 Tangible fixed assets 6 Tangible fixed assets, at cost 7,493,673,426 7,785,612,937 Less accumulated depreciation (3,378,216,029) (3,050,569,306) Tangible fixed assets, net book value 4,115,457,397 4,735,043,631 Intangible fixed assets 7 Intangible assets, at cost 30,845,285,557 26,500,000 Less accumulated amortization (3,103,645,221) (17,033,332) Intangible assets, net book value 27,741,640,336 9,466,668 TOTAL ASSETS 48,853,392,445 31,226,855,478 LIABILITIES AND FUND BALANCE Short - term liabilities 8,048,001,156 590,442,450 Payables 8 7,883,810,385 482,137,094 Taxes and amounts payable to the State budget 18,000,000 40,442,925 Other payables 146,190,771 67,862,431 Fund balance (2,458,365,087) 14,886,633,314 Represented by contributions from - IDA Fund (2,466,103,149) 14,887,458,423 - Counterpart fund - - Other fund 7,738,062 (825,109) Foreign exchange difference 11,406,658,643 11,005,269,415 Funds for fixed assets acquisition 31,857,097,733 4,744,510,299 TOTAL LIABILITIES AND FUND BALANCE 48,853,392,445 31,226,855,478 Do Thi Huong Nguyen Thi Sen Dang Kim Chung Preparer Chief Accountant Project Director Hanoi, Vietnam 29 June 2020 5 g Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') STATEMENT OF OFF-BUDGET INCOME AND EXPENDITURE for the year ended 31 December 2019 Currency: VND Cumulative to For the year ended 31 December 2019 Notes 31 December 2019 (Restated) INCOME Contribution from International Development Association (IDA) 9.1 22,994,000,000 557,586,136,170 Contribution from the Government of Vietnam 10 2,648,250,369 22,194,946,281 Other income 8,583,802 129,557,152 TOTAL INCOME 25,650,834,171 579,910,639,603 EXPENDITURE 11 Part 1: Strengthening the Social Assistance and Poverty Reduction System 29,074,147,136 415,267,198,427 In which: Expenses for building an integrated management information system MISI and buying hardware for 59 provinces 2,419,785,557 76,904,008,271 Part 2: Launching a Consolidated Social Assistance Program 323,317,783 86,768,326,686 Part 2.1: Transfers of benefits to additional beneficiaries identified by the management information system - Part 2.2: Transfers of service fees to the VN POST of the Project Provinces for the purpose of implementing the Transfers, including Benefits Transfers to Beneficiaries 323,317,783 86,768,326,686 Part 3: Project Management 13,598,367,653 80,333,479,577 TOTAL EXPENDITURE 42,995,832,572 582,369,004,690 SHORTAGE OF INCOME OVER EXPENDITURE (17,344,998,401) (2,458,365,087) Do Thi Huong Nguyen Thi Sen Qang Kim Chung Preparer Chief Accountant Project Director Hanoi, Vietnam 29 June 2020 6 � � � г � о с� м r � � �� � � ■ ' Fo �cov� й v cv ш ии т 00 о `Г'йй й °' °о м мv °о и м V со v oi о t� v � ro м гл � . Ш � пi Г ai й й со ш о й � � U �' ... � i й N й v � т т оо й с� ! � � а а �� N N � � � � о о N � � �� � � о о о С.7) � L � т г� r rn oi ео �� � и -�с ш й й т оо � � О � N �� с�'v N с� iŭ � U Ш � � ..-��'. ° � ° � � У � в� ш �: i � о �� ,� N , � � �� N сц � � � �о � � т и ш � � L CL � гй `у � й й и и . ,� ° о v v v v _Ш � U и т а� � � � �° N й N N � � 3 � � � а о� о t� г� ш � о °� т � � � �� � е^- V N с0 �О N М � � �t т со со о� й со ш v и �,.� � Q� Г м °' °о м м� гмi о Q Г � `- � оtDо ш о ш й C° й fO � и и с� о� г� � о о а гл � й `п `г�° � о�о й ош N � и и v �л .� и �° °ошо � м й � �� й о � � ♦о омт и � � о о м v г� �п � г� г� N � � оиоо м Г � м мм амо_ а' � о с� и оо о � vo�� о v oS м мт и � � rnй ш о rt м мй й м Ш N N н N N `у' � � � . � � � о � � �� � � � � �м м i �� f� �. р �,� со ао со и � �, U' � ш � амо с°v �°ч ш � с Е.с и и и Ш� � а' со ао оо (Л с � � и о � с о � U ,� р °' т�°с �й ш � � � �� � � Q � Z 'п Q� м м м м � N .� _Q р ш � о о ° о СЛ _С � z � т � N N N N Z U ш а. ' о � � � � � � � й Ш `о с� м пi м I � � м сл `� '� и а о� о сд г� м м м е� N р с о о Г ц � �� й � � � о о и i� Q р LL о о r` й n �и � � Z Q °о_ °о � � м м о й Й Z3% О Q � й w n�. �' N смv ои � е'� � � г (� rn и о v м м и м '° Ш ш N N N `�' о а t� � п U .,,. }� � � � (� U р и рГ й .D а й ... � � � � и О Q � т т �� � > � "" "� ~ ш ш °' с°�i г i т Z ш т � '' j� �О U` � °�' � :° а� о �о� � , � р� � о й т Е Фи ��b � I� и �� т� о ш Q � й� ш ��� г � т > т �� U �•� lip с � '" �йоо-а ��й с О ( I � ��V � М � � и � � .О � с � о � � � и I iB � о � �� .�-�.л ��иO и�ст о� � r, ■ и � и О� w w � с � 0��� и�� ш т � � � (� Q • О � k N о� О Ф У й �� � N о р о L� 'Q '� т r о й�� ш� w и� � � � � Z � � ш т 3 � а с � п,т г� �о �j Q �� Ш(ц �с� Е Е�' ш� �°�'а�ш`�°.ш�� о a�i C�F=- � Ш N �� � Ш °о° о о« �. `�Ет<ас�♦'оси а Q- L О- >' т �т� с с=о с/�л-сйш-��сN�ш�а х t-� = Ш � N � "" о ш и �._д __..с�=a�a,..w а��' д�г - с L � Ф Е � о�, � у � ш;с ш т.с N и с" ш ш`п м О а 1- С1- � � � � п> Q� Ш � о й о L О к т о� xQ т � т й т.,г�"'_, � т т о = Х � � � (Л � р й о и� с �а� о~ ш аа;Ш E-�aQa o�t- а� иш �� = N �� ■ ■ Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') STATEMENT OF OFF-BUDGET DESIGNATED ACCOUNT as at 31 December 2019 and for the year then ended Bank account 21110370049970 Service bank Joint Stock Bank for Investment and Development of Vietnam - Hanoi Branch Address No 4B, Le Thanh Tong Street, Hoan Kiem District, Hanoi City, Vietnam Financing Agreement 5354-VN Currency USD BALANCES AND MOVEMENTS OF OFF-BUDGET DESIGNATED ACCOUNT Note USD VND equivalent Balances as at 31 December 2018 723,841.29 16,416,720,457 Add Amount received from International Development Association (IDA) 9.2 1,000,000.00 22,994,000,000 Foreign exchange difference 401,020,257 Deduct Total amount withdrawn 1,007,606.62 23,342,514,185 Bank charges 715 81 16,585,862 Balances as at 31 December 2019 715,518.86 16,452,640,667 Balances as at 31 December 2019 as per 715,518.86 16,452,640,667 bank statement RECONCILIATION OF OFF-BUDGET DESIGNATED ACCOUNT USD Amount advanced by International Development Association at the beginning of the year 2,098,144.14 Additional advances from International Development Association in the year 1,000,000.00 Deduct: Total amount accepted for advance clearance in the year 1,871,824.57 Advance to designated account as at 31 December 2019 1,226,319.57 Balance of designated account as at 31 December 2019 715518.86 Add". Amount withdrawn and not yet claimed as at 31 December 2019 510,800.71 Total advance to designated account as at 31 December 2019 1,226,319.57 The Project was closed on 30 April 2020 according to the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic oNi tnam ,and the International Development Association as well as Agreement letter to extend the Project duration. As at that date, the balance of off-budget designated account was USID 391,256.78. Do Thi Huong Nguyen TWSen Dang Kim Chung Preparer Chief Accountant Project Director Hanoi, Vietnam 29 June 2020 8 〕、。方〕、。 • -. Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') STATEMENT OF ON-BUDGET SOURCES AND USES OF FUNDS for the year ended 31 December 2019 Currency: VND For the year Cumulative to ended 31 31 December 2019 Items Notes December 2019 (Restated) FUND ALLOCATION Fund from IDA - 118,839,282,324 TOTAL 118,839,282,324 USED OF FUNDS Part 2.1- Transfers of benefits to additional beneficiaries identified by the management 51,584,951,000 information system 51,584,951,000 AMOUNTBROUGHTFORWARD(-) 67,254,331,324 This amount is being maintained in the State Treasury. Do Thi Huong Nguyen Thi Sen Dang Kim Chung Preparer Chief Accountant Project Director Hanoi, Vietnam 29 June 2020 10 g Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') STATEMENT OF ON-BUDGET USES OF FUNDS DETAILED BY PROVINCE for the year ended 31 December 2019 * Currency VND Cumulative to 31 For the year ended 31 December 2019 No Province December 2019 (Restated) 1 Ha Giang Province - 25,179,350,000 2 Lam Dong Province - 6,813,651,000 3 Quang Nam Province - 13,764,300,000 4 Tra Vinh Province - 5,827,650,000 - 51,584,951,000 Do Thi Huong Nguyen Thi Sen Dang Kim Chung Preparer Chief Accountant Project Director Hanoi, Vietnam 29 June 2020 U1 W g Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') STATEMENT OF ON-BUDGET FOREIGN CURRENCY DEPOSIT ACCOUNT for the year ended 31 December 2019 BALANCE AND MOVEMENT OF FOREIGN CURRENCY ACCOUNT Currency: USD Money transferred from Money transferred from foreign currency account IDA to foreign curency to local currency in the Balance of foreign Year account State Treasury currency account 2016 5,425,708 (5,425,708) 2017 - 2018 2019 - TOTAL 5,425,708 (5,425,708) BALANCE AND MOVEMENT OF LOCAL CURRENCY ON THE STATE TREASURY Currency: VND Money received from Amount disbursed from Balance of local currency foreign currency account the State Treasury in the State Treasury Year to the State Treasury (Restated) (Restated) 2016 118,839,282,324 (24,164,360,000) 94,674,922,324 2017 - (19,391,441,000) 75,283,481,324 2018 - (8,029,150,000) 67,254,331,324 2019 - - 67,254,331,324 TOTAL 118,839,282,324 (51,584,951,000) 67,254,331,324 Do Thi Huong Nguyen Thi Sen Dang Kim Chung Preparer Chief Accountant Project Director Hanoi, Vietnam 29 June 2020 12 g Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA") NOTE TO THE FINANCIAL STATEMENTS as at 31 December 2019 and for the year then ended * 1. PROJECT INFORMATION On 24 April 2014, the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA") signed the Financing Agreement for Credit No. IDA 5354 - VN ("Financing Agreement") with the amount of US$ 60 million to finance for the Social - Assistance System Strengthening Project ("the Project") effective from 22 July 2014. Counterpart fund is approximately VND 52.59 billion, equivalent to US$ 2.5 million; in which, fund from State Budget of VND 10.10 billion and fund from Province Budget of VND 42.49 billion. The overall objective of the Project is to support the Vietnamese government in strengthening the social assistance system by developing innovations in management and payment service nationwide, and by piloting in the 4 project provinces, including Ha Giang, Quang Nam, Lam Dong and Tra Vinh. The Project is implemented by the Ministry of Labor-Invalids and Social Affairs, the Government of the Socialist Republic of Vietnam and be decentralised to Central Project Management in Hanoi ("CPMU") and 4 Provincial Project Managements ("PPMU") in Ha Giang, Quang Nam, Lam Dong and Tra Vinh. The Project consists of 3 following components: (i) Part 1- Strengthening the Social Assistance and Poverty Reduction System; Provision of support for the development and testing of improved mechanisms for social assistance delivery and management, including: Building a national database of social assistance beneficiaries and developing an integrated management information system (MIS) for nationwide use; Developing a social collaborator network in the Project Provinces and supporting communication - for - development activities at the national level and in the 4 Project Provinces, including provision of remuneration for social collaborators; Developing and implementing a grievance redress mechanism in the Project Provinces; and Developing and implementing a monitoring and evaluation system, and providing support for policy formulation at the national level and in the Project Provinces. (ii) Part 2 - Launching a Consolidated Social Assistance Program; and Testing the improved mechanisms developed under Part I of the Project in the Project Provinces through the launching of social assistance consolidation, including: Part 2.1: Provision of Benefits to Additional Beneficiaries identified by the management information system; and Part 2.2: Provision of service fees to the VNPOST of the Project Provinces for the purpose of implementing the Transfers, including the Benefits Transfers to Beneficiaries. (iii) Part 3 - Project Management Provision of support for Project management activities, including: Operation of the Central Project Management Unit (CPMU) and Provincial Project Managements Units (PPMUs); and Supervision, procurement, financial management, disbursement, audit, and monitoring and evaluation. 13 g Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') NOTE TO THE FINANCIAL STATEMENTS (continued) as at 31 December 2019 and for the year then ended 2. BASIS OF PREPARATION AND FISCAL YEAR Basis of preparation The Project's financial statements, except for the statement of designated account, are presented in Vietnam dong ("VND"). The statement of designated account is presented in United States dollars ("USD"). T The Project's financial statements are prepared in accordance with the accounting policies described in Circular No. 107/2017/TT-BTC issued by the Ministry of Finance, dated 10 October 2017, guiding the public sector accounting and Project Operation Manual ("POM"). This circular is effective since 1 January 2018 and replaces Decision No. 19/2006/QE-BTC issued by the Ministry of Finance, dated 30 March 2006, enforcing the regulations on the public sector accounting and Circular No. 185/2010/TT-BTC, dated 15 November 2010, amending supplementing the public sector accounting issued under Decision No. 19/2006/QD-BTC. Fiscal year The Project's fiscal year applicable for the preparation of its financial statements starts on 1 January and ends on 31 December. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies adopted in the preparation of the financial statements are set out below: Contribution from the International Development Association ("IDA") Contributions from IDA are recognised when cash is transferred to the Project's designated account which is managed by the CPMU or when payments are made directly to suppliers, rather than when being committed or budgeted. Contribution from the Government of Vietnam ("counterpart fund") Contribution from the Government of Vietnam (which is comprised of fund from State budget and fund from Province budget) are recognised when cash is deposited in the Project's State Treasury Accounts of Central Project Management Unit ("CPMU") and Provincial Project Managements Unit ("PPMU") in four provinces or when disbursements are made through the State Treasury Accounts at CPMU and PPMU at four provinces rather than when being committed or budgeted. Other income Other income include receivables from sales of bidding documents and bank interest when cash is actually received into bank account. Expenditure Expense is recognised when activities are completed based on acceptance of work done or equivalent supporting documents, are within detailed budget and approved by the Project Director. 14 Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') NOTE TO THE FINANCIAL STATEMENTS (continued) as at 31 December 2019 and for the year then ended 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Foreign exchange currency transactions Transactions in other currencies are translated into VND which are determined as follows: Contribution received in foreign currency are recorded at the average exchange rate determined monthly by Ministry of Finance. Expenses incurred in foreign currency are recorded at the actual exchange rate at the commercial bank where the Project opens its account at the transaction date. Disbursement transactions in foreign currency are recorded using first in, first out method (FIFO). Circular 107/2017/TT-BTC does not require revaluation of monetary balances denominated in foreign currencies as at the end of the year. Tangible fixed assets Tangible fixed assets are stated in the statement of budget assets, liabilities and fund balance at cost less accumulated depreciation. The cost of a tangible fixed asset comprises its purchase price and any directly attributable costs of bringing the tangible fixed asset to working condition for its intended use. When tangible fixed assets are sold or retired, cost and accumulated depreciation are reduced from statement of off-budget assets, liabilities and fund balance and any proceeds from their disposal is included in the statement of off-budget income and expenditure. Intangible fixed assets Intangible fixed assets are stated in the statement of budget assets, liabilities and fund balance at cost less accumulated amortization. The cost of an intangible fixed asset comprises its purchase price and any directly attributable costs of preparing the intangible fixed asset for its intended use. When intangible fixed assets are sold or retired, cost and accumulated amortisation are reduced from statement of off- budget assets, liabilities and fund balance and any proceeds from their disposal is included in the statement of off-budget income and expenditure. Depreciation and amortization Depreciation of tangible fixed assets and amortization of intangible fixed assets are calculated on a straight-line basis over the estimated useful life. Annual depreciation and amortization rate are determined according to Circular No. 45/2018/TT-BTC dated 7 May 2018 issued by the Ministry of Finance, details as follow: Machinery and equipment From 12.5% - 20% Means of transportation 6.67% Office equipment From 12.5% - 20% Computer software From 10% - 16.67% Depreciation and amotization are debited to funds for fixed assets acquisition on the statement of off-budget assets, liabilities and fund balance. Advances Advances includes advance to Departments of Labour - Invalids and Social Affairs, to suppliers and to the Project officers to implement the Project's activities are carried as part of the fund balance until subsequent liquidation or clearance at approval of the Project management. 15 U g Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') NOTE TO THE FINANCIAL STATEMENTS (continued) as at 31 December 2019 and for the year then ended 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Payables Payables are recognised based on payment amount for goods and services being provided and certificate of work done or other similar related supporting documents are completed and approved by the Project management but not yet paid at the end of reporting period. Personal income tax not yet paid to the Tax Authority and social security contribution not yet paid to Social Insurance Body at the end of reporting period are stated as payables on statement of off-budget assets, liabilities and fund balance. Capital expenditure All items of capital expenditure are recognized as part of the Project's expenses when incurred. 4. CASH Currency: VND Ending Balance Opening Balance Cash at bank 16,564,623,790 16,520,667,351 Account in USD 16,452,640,667 16,416,720,457 Account in VND 111,983,123 103,946,894 Cash on hand 20,071,343 26,541,980 TOTAL 16,584,695,133 16,547,209,331 5. ADVANCES Currency: VND Ending Balance Opening Balance Provincial Departments of Labor-Invalids and Social Affairs 149,703,694 9,453,250,769 Transformation & Change Management - 143174,749 Consulting Co., Ltd. 3 143,174,749 TOTAL 149,703,694 9,596,425,518 U U 16 I g Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') NOTE TO THE FINANCIAL STATEMENTS (continued) as at 31 December 2019 and for the year then ended 6. TANGIBLE FIXED ASSETS The Project transferred some tangible fixed assets on 11 October 2019 and 30 December 2019 to the Office of Ministry of Labor, Invalids and Social Affairs following the Decision No. 1961/QiD-LfOTBXH. 7. INTANGIBLE FIXED ASSETS Currency: VND Computer software Cost: Beginning balance 26,500,000 MIS software system recognized during the year 30,818,785,557 Ending balance 30,845,285,557 Accummulated amortization: Beginning balance 17,033,332 Amortization during the year 3,086,611,889 Ending balance 3,103,645,221 Net carrying amount: Beginning balance 9,466,668 Ending balance 27,741,640,336 8. PAYABLES Currency: VND Ending Balance Opening Balance Tri Nam Investment and Technology Joint Stock Company 3,359,670,000 - Provincial Departments of Labor-Invalids and Social Affairs 1,370,486,768 154,087,716 Ha Giang Post Office - 37,626,000 Others 3,153,653,617 290,423,378 TOTAL 7,883,810,385 482,137,094 17 U g Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') NOTE TO THE FINANCIAL STATEMENTS (continued) as at 31 December 2019 and for the year then ended 9. CONTRIBUTION FROM INTERNATIONAL DEVELOPMENT ASSOCIATION ("IDA") 9.1 Contribution from IDA Total amount received in the designated account USD VND equivalent Accumulated as at 31 December 2018 24,172,333.87 534,592,136,170 Increase during the year Withdrawal Application No DAB014 1,000,000.00 22,994,000,000 Total fund received for the year ended 31 December 2019 1,000,000.00 22,994,000,000 Accumulated as at 31 December 2019 25,172,333.87 557,586,136,170 9.2 Reconciliation of contribution from IDA For the year ended 31 December 2019 Cumulative to 31 December 2019 USD VND equivalent USD VND equivalent Contribution from IDA 1,000,000.00 22,994,000,000 25,172,333.87 557,586,136,170 In which: Contribution from IDA received through designated account 1,000,000.00 22,994,000,000 25,172,333.87 557,586,136,170 Contribution from IDA according to Statement of withdrawals 1,000,000.00 22,994,000,000 25,172,333.87 557,586,136,170 W H1 *EEEEEEEEEEEgEEggEgEEEUggEEEEEEEEE Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA") NOTE TO THE FINANCIAL STATEMENTS (continued) as at 31 December 2019 and for the year then ended 10. CONTRIBUTION FROM THE GOVERNMENT OF VIETNAM (COUNTERPART FUND) Currency: VND For the year ended 31 December 2019 Cumulative to 31 December 2019 Fund from Fund from Fund from Central Provincial state Fund from Central Provincial state state budget budget Total state budget budget Total CPMU 1,011,570,854 - 1,011,570,854 8,196,611,516 - 8,196,611,516 Ha Giang PPMU - 421,031,200 421,031,200 - 5,608,629,300 5,608,629,300 Lam Dong PPMU - 212,025,605 212,025,605 - 2,877,914,234 2,877,914,234 Tra Vinh PPMU - 503,622,710 503,622,710 - 2,431,698,231 2,431,698,231 Quang Nam PPMU - 500,000,000 500,000,000 - 3,080,093,000 3,080,093,000 TOTAL 1,011,570,854 1,636,679,515 2,648,250,369 8,196,611,516 13,998,334,765 22,194,946,281 19 Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') NOTE TO THE FINANCIAL STATEMENTS (continued) as at 31 December 2019 and for the year then ended 11. EXPENDITURE 11.1. Expenditure by categories and sources of funds Currency: VND For the year ended 31 December 2019 Cumulative to 31 December 2019 (Restated) IDA fund Counter part Other fund IDA fund Counter part fund Other fund Total (Restated) fund (Restated) Total Part 1: Strengthening the Social Assistance and Poverty Reduction System 29,074,147,136 - - 29,074,147,136 415,267,198,427 - - 415,267,198,427 In which: Expenses for building an integrated management in formation system MISI and buying hardware for 59 provinces 2,419,785,557 - - 2,419,785,557 76,904,008,271 - - 76,904,008,271 Part 2: Launching a Consolidated Social Assistance Program 323,317,783 - - 323,317,783 86,768,326,686 - - 86,768,326,686 Part 2.2: Provision of service fees to the VN POST of the Project Provinces for the purpose of implementing the Transfers, including the Benefits Transfers to Beneficiaries 323,317,783 - - 323,317,783 86,768,326,686 - - 86,768,326,686 Part 3: Project Management 10,950,096,653 2,648,250,369 20,631 13,598,367,653 58,016,714,206 22,194,946,281 121,819,090 80,333,479,577 TOTAL 40,347,561,572 2,648,250,369 20,631 42,995,832,572 560,052,239,319 22,194,946,281 121,819,090 582,369,004,690 20 Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA") NOTE TO THE FINANCIAL STATEMENTS (continued) as at 31 December 2019 and for the year then ended 11. EXPENDITURE (continued) 11.2. Actual expenditure and budget comparison Currency: VND For the year ended 31 December 2019 Cumulative to 31 December 2019 (Restated) Actual Actual Disbursement expenditure Disbursement expenditure Approved budget Variance rate (%) (Restated) Approved budget Variance rate (%) Part 1: Strengthening the Social Assistance and Poverty Reduction System 29,074,147,136 75,838,000,000 (46,763,852,864) 38% 415,267,198,427 778,996,000,000 (363,728,801,573) 53% In which: Expenses for building an integrated management information system MISI and buying hardware for 59 provinces 2,419,785,557 3,500,000,000 (1,080,214,443) 69% 76,904,008,271 131,030,000,000 (54,125,991,729) 59% Part 2: Launching a Consolidated Social Assistance Program 323,317,783 1,000,000,000 (676,682,217) 32% 86,768,326,686 124,180,000,000 (37,411,673,314) 70% Part 2.2: Provision of service fees to the VN POST of the Project Provinces for the purpose of implementing the Transfers, including the Benefits Transfers to Beneficiaries 323,317,783 1,000,000,000 (676,682,217) 32% 86,768,326,686 124,180,000,000 (37,411,673,314) 70% Part 3: Project Management 13,598,367,653 16,052,000,000 (2,453,632,347) 85% 80,333,479,577 113,176,000,000 (32,842,520,423) 71% TOTAL 42,995,832,572 92,890,000,000 (49,894,167,428) 46% 582,369,004,690 1,016,352,000,000 (433,982,995,310) 57% 21 Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') NOTE TO THE FINANCIAL STATEMENTS (continued) as at 31 December 2019 and for the year then ended 12. RESTATEMENT OF CORRESPONDING FIGURES Certain figures in the financial statements as at 31 December 2018 and for the year then ended were restated by the Project management in 2019. Details are as below: 12.1. Change in presentation of other income from contract penalty In 2018, the Project imposed penalty of VND 4.8 billion on the joint venture between FPT Information System Co., Ltd. and Lotus Gold Vietnam Joint Stock Company because this joint venture missed the deadline for delivery of equipment and installation for the Project as specified in the terms of contract. The penalty was presented as other income in the statement of off-budget income and expenditure of 2018. In 2019, CPMU decided restatement to decrease the other income and corresponding expenditure to better present the nature of this penalty. Impacts of the restatement are as follows: (i) Statement of off-budget assets, liabilities and fund balance Currency: VND 31 December 2018 Restatement 31 December 2018 Fund balance (As previously presented) (Restated amounts) IDA fund 10,032,538,287 4,854,920,136 14,887,458,423 Other fund 4,854,095,027 (4,854,920,136) (825,109) (ii) Accumulated expenditures for the period up to 31 December 2018 Currency: VND Accumulated to 31 Accumulated to 31 December 2018 (As December 2018 Expenditure Accumulated to 31 ITEMS previously presented) Restatement (Restated amount) incurred in 2019 December 2019 INCOME - Other income 4,975,893,486 (4,854,920,136) 120,973,350 8,583,802 129,557,152 EXPENDITURE - Part 1: Strenthening the Social Assitance and Porverty Reduction System 391,047,971,427 (4,854,920,136) 386,193,051,291 29,074,147,136 415,267,198,427 In which: Expenses for building an integrated management information system MISI and buying hardware for 59 provinces 79,339,142,850 (4,854,920,136) 74,484,222,714 2,419,785,557 76,904,008,271 22 Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA") NOTE TO THE FINANCIAL STATEMENTS (continued) as at 31 December 2019 and for the year then ended 12. RESTATEMENT OF CORRESPONDING FIGURES (continued) 12.2. Finalisation of on-budget sources CPMU adjusted figures in the Statement of on-budget sources and uses of funds in 4 provinces of the Project, following the Minutes of Settlement between the Provincial Department of Labor-Invalids and Social Affairs and Provincial Department of Finance. Impacts of the restatement are as follows: (i) Statement of on-budget sources and uses of funds Currency: VND Accumulated to 31 Accumulated to 31 December 2018 (As December 2018 Expenditure Accumulated to 31 USE OF FUNDS previously presented) Restatement (Restated amount) incurred in 2019 December 2019 Part 2.1: Transfers of benefits to additional beneficiaries identified by the management information system 51,605,790,000 (20,839,000) 51,584,951,000 - 51,584,951,000 (ii) Statement of on-budget sources and uses of funds detailed by provinces Currency: VND Accumulated to 31 Accumulated to 31 December 2018 (As December 2018 Expenditure Accumulated to 31 previously presented) Restatement (Restated amount) incurred in 2019 December 2019 Ha Giang Province 24,957,910,000 221,440,000 25,179,350,000 - 25,179,350,000 Lam Dong Province 6,865,360,000 (51,709,000) 6,813,651,000 - 6,813,651,000 Quang Nam Province 13,956,280,000 (191,980,000) 13,764,300,000 - 13,764,300,000 Tra Vinh Province 5,826,240,000 1,410,000 5,827,650,000 - 5,827,650,000 61,605,790,000 (20,839,000) 51,584,951,000 - 51,684,951,000 23 * Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') NOTE TO THE FINANCIAL STATEMENTS (continued) as at 31 December 2019 and for the year then ended 12. RESTATEMENT OF PRIOR PERIOD'S CONSOLIDATED FINANCIAL STATEMENTS (continued) 12.2. Finalisation of on-budget sources (continued) (iii) Statement of on-budget foreign currency deposit account Currency: VND Amount disbursed from Amount disbursed from the State Treasury (As the State Treasury Year previous presented) Restatement (Restated amount) 2016 (24,007,260,000) (157,100,000) (24,164,360,000) 2017 (19,480,200,000) 88,759,000 (19,391,441,000) 2018 (8,118,330,000) 89,180,000 (8,029,150,000) TOTAL (51,605,790,000) 20,839,000 (51,584,951,000) 13. PROJECT CLOSING PROCESS According to the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association as well as Agreement letter to extend the Project duration, the Project was closed on 30 April 2020. The Project carried out the Project closing procedures such as: closed the bank account, returned the remained fund balance to the donor and submitted the Project's final report following current regulations by Ministry of Labor, Invalids and Social Affairs. As at the date of this report, the Project has not completed the process of transferring its fixed assets as the transfer plan has not been approved by the Ministry of Labor, Invalids and Social Affairs. The Project also collected advances and settled liabilities outstanding as at 31 December 2019 except for audit fee payable. Do Thi Huong Nguyen Thi Sen Dang Kim Chung Preparer Chief Accountant Project Director Hanoi, Vietnam 29 June 2020 24 Reference: 61430372/21042058 - Compliance * INDEPENDENT ASSURANCE REPORT ON COMPLIANCE To: Central Project Management Unit - Social Assistance System Strengthening Project We have examined the compliance of the Project management of the Social Assistance System Strengthening Project ("the Project") including Central Project Management Unit ("CPMU"); Project Management Unit of Ha Giang province ("Ha Giang PPMU"), Project Management Unit of Lam Dong province ("Lam Dong PPMU"), Project Management Unit of Quang Nam province ("Quang Nam PPMU"), and Project Management Unit of Tra Vinh province ("Tra Vinh PPMU") (also referred to as "4 PPMUs") with the applicable laws, regulations, procurement procedures and other provisions of the Financing Agreement between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA") (the "Financing Agreement") for the year ended 31 December 2019. CPMU and 4 PPMUs are responsible for the compliance with the Financing Agreement, the Project Operation Manual ("POM"), other laws and regulations applicable to the Project (collectively referred to as "the Project's regulations"). Auditor's responsibility Our responsibility is to express an opinion, based on our examination, on the compliance of CPMU and 4 PPMUs with the Project's regulations that could have a direct and material financial effect to the financial statements of the Project during the year ended 31 December 2019. We conducted our examination in accordance with the principles of International Standard on Assurance Engagements 3000 - "Assurance Engagements other than Audits or Reviews of Historical Financial Information" ("ISAE 3000") insofar this standard could be usefully applied in this examination and in its specific compliance context. This standard requires that we comply with ethical requirements and that we plan and perform the examination to obtain reasonable assurance about whether CPMU and 4 PPMUs comply with the Project's regulations that could have a direct and material financial effect to the financial statements. Our examination included obtaining a sufficient understanding of the Project and the Project's regulations; assessing the risk on non-compliance exists that could have a direct and material financial effect to the financial statements of the Project; testing and evaluating, on a sample basis, the compliance of CPMU and 4 PPMUs with the Project's regulations based on the assessed risk; and performing such other procedures as we considered necessary in the circumstances. We considered the following criteria in evaluating the compliance of CPMU and 4 PPMUs with the Project's regulations: CPMU and 4 PPMUs' awareness of the Project's regulations; the implementation of the Project's regulations by CPMU and 4 PPMUs; the significance to the financial statements where CPMU and 4 PPMUs fail to comply with one requirement or several requirements in the Project's regulations, if any; and that a weakness or a deficiency existed where CPMU and 4 PPMUs fail to comply with one or several requirements in the Project's regulations that could have a direct and material financial effect to the financial statements. We believe that our examination provides a reasonable basis for our opinion. 25 Opinion In our opinion, the Project management comply, in all material respects, with the Project's regulations that could have a direct and material financial effect to the financial statements of the Project for the year ended 31 December 2019 based on the evaluating criteria above. Other Matters We draw attention to Appendix 1 - Management letter in which we discussed minor departures from the Project's regulations which have no direct and material financial effect to the financial statements of the Project but may put the Project's objectives at risk. This examination involved a historic evaluation of the compliance of the Project management with the Project's regulations at a specific point in time. Thus, this examination does not provide assurance for future periods due to the risk of changes in the Project's regulations, or that the degree of compliance with the Project's regulations may deteriorate. For and on behalf of Ernst & Young Vietnam Limited Nguyen Thai Thanh Deputy General Director Audit Practising Registration Certificate No. 0402-2018-004-1 Hanoi, Vietnam 29 June 2020 2 U U2 Reference: 61430372/21042058 - Internal Control INDEPENDENT ASSURANCE REPORT ON THE EFFECTIVENESS OF INTERNAL CONTROL To: Central Project Management Unit - Social Assistance System Strengthening Project We have audited the design and operating effectiveness of the internal control of Social Assistance System Strengthening Project ("the Project") as operated by the management of the Project including Central Project Management Unit ("CPMU"); Project Management Unit of Ha Giang province ("Ha Giang PPMU") Project Management Unit of Lam Dong province ("Lam Dong PPMU"), Project Management Unit of Quang Nam province ("Quang Nam PPMU"), and Project Management Unit of Tra Vinh province ("Tra Vinh PPMU") (also referred to as "4 PPMUs") which existed during the year ended 31 December 2019. The internal control was set up for the purpose of managing risks no achievement of the Project's objectives, including the reasonable prevention and detection of errors, irregularities and fraud. The internal control is the responsibility of the Project management. Auditor's Responsibility Our responsibility is to express an opinion, based on our audit, on the effectiveness of the internal control that could have a direct and material financial effect to the financial statements of the Project for the year ended 31 December 2019. We conducted our audit in accordance with the principles of International Standard on Assurance Engagements 3000 - Assurance Engagements other than Audits or Reviews of Historical Financial Information ("ISAE 3000") insofar this standard could be usefully applied in this audit and in its specific compliance context. This standard requires that we comply with ethical requirements and that we plan and perform the audit to obtain reasonable assurance about whether the internal control for the Project is adequately designed for the purpose of the Project and was operating effectively during the period covered by the audit. Our audit included obtaining a sufficient understanding of the Project, and the internal control for the Project; assessing the risk that a material weakness exists that could have a direct and material financial effect to the financial statements of the Project; testing and evaluating, on a sample basis, the design and operating effectiveness of internal control based on the assessed risk; and performing such other procedures as we considered necessary in the circumstances. We considered the following criteria in evaluating the effectiveness of the internal control: the requirement for design and implementation of the internal control in the Project Operation Manual ("POM"); the appropriateness of the internal control for the Project's activities and objectives; the implementation of the internal control by the Project management to achieve its objective of prevention and detection of errors, irregularities and fraud that could have a direct and material financial effect to the financial statements of the Project; the significance to the financial statements where one control or several controls did not operate as designed, if any; and that a weakness or a deficiency existed where a control or several controls did not reasonably prevent or detect risks that could have an adverse impact on the objectives of those internal controls which are to provide reasonable assurance that the financial statements are prepared, in all material respects, in accordance with the adopted accounting policies and POM, that the funds are utilised for the purposes defined in the Financing Agreement between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA") ("the Financing Agreement") and that the Project complies with the Financing Agreement, POM and other applicable laws and regulations. We believe that our audit provides a reasonable basis for our opinion. 27 Opinion In our opinion, the Project's internal control which existed in CPMU and 4 PPMUs during the year ended 31 December 2019, in all material respects, was adequately designed for the purpose of the Project and operated in an effective manner, based on the evaluating criteria above. Other Matters We draw attention to Appendix 1 - Management letter in which we discussed findings from the internal control which have no direct and material financial effect to the financial statements of the Project but may put the effectiveness of Project's internal control at risk. This audit involved a historic evaluation of the internal control at a specific point in time. Thus, this audit does not provide assurance for future periods due to the risk that internal control may become inappropriate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate. For and on behalf of Ernst & Young Vietnam Limited Nguyen Thai Thanh Deputy General Director Audit Practising Registration Certificate No. 0402-2018-004-1 Hanoi, Vietnam 29 June 2020 28