·- Office ·of the rm: BM 2€I4.mfltt'l1 :m mm Provincial Audit Wing Constitution Avenue Islamabad No.PA/FAP/Federal/F-13/~76 r, Dated: 06.02.2015 1. Secretary Economic Affairs Division Pak Secretariat Block "C" Islamabad Country Director, World Bank, 20-A, Shahrah-e-Jamhuriat, Sector G-5/1, Islamabad Subject: Foreign Aided Projects (FAP) Audit Reports Kindly find enclosed a copy of following FAP audit reports for further necessary action: S.No REPORT 1 Water Sector Capacity Building and Advisory Service Project IDA Loan No. 4437-PaK M/o water and Power for F.Y 2013-14 2 Additional Financing for the Social Safety Net Project IDA Loan No. 5042, Benazir Income Support ProQram for the F.Y. 2013-14 3 Financial Attest Audit Report on the Accounts of Project titled "Project Preparation Facilitation (PPF) for Revenue Mobilization Project (RMP), IDA Credit No. Q-813-PK" of Federal Tax Ombudsman forthe FY 2013-14 Enclosure: (As Above) ~?- Aftab Ahmed Audit Officer Provincial Audit Wing Financial Attest Audit Report on the Accounts of Additional Financing for the Social Safety Net Project IDA Credit No. 5042 I Benazir Income Support Program I for the Financial Year 2013-14 I I I I I Auditor General of Pakistan Islamabad I I I I I TABLE OF CONTENTS Abbreviations and Acronyms .................................................................................................... 1 PREFACE ................................................................................................................................. 2 PART-1 ..................................................................................................................................... 3 I PROJECT OVERVIEW ............................................................................................................ 4 AUDITOR'S REPORT TO THE MANAGEMENT ................................................................ 5 I FINANCIAL STATEMENTS .................................................................................................. 7 PART-11 .................................................................................................................................... 8 I COVER LETTER TO THE MANAGEMENT LETTER ......................................................... 9 EXECUTIVE SUMMARY ..................................................................................................... 11 I MANAGEMENT LETTER .................................................................................................... 12 1. INTRODUCTION ............................................................... :........................................ 13 I 2. AUDIT OBJECTIVES ..................... :........................................................................... 13 3. AUDIT SCOPE AND METHODOLOGY .................................................................. 13 I 4. . AUDIT FINDINGS AND RECOMMENDATIONS ................................................... 13 4.1 FinancialManagement ............................................................................ :.............. 14 I 5. CONCLUSION ............................................................................................................ 20 ACKNOWLEDGEMENT ....................................................................................... :............... 21 I I I I I I I I I I Abbreviations and Acronyms I · BDC Benazir Debit Card BISP Benazir Income Support Program I DLis FAM Disbursement Linked Indicators Financial Audit Manual I FY GFR Financial Year General Financial Rules GOP Government of Pakistan I IDA INTOSAI International Development Association International Organization of Supreme Audit Institutions I IP SAS ISSA! International Public Sector Accounting Standards International Standards of Supreme Audit Institutions O.M. Office Memorandum I PAD PMT Project Appraisal Document Proxy Means Test Rs. I SDR Rupees Special Drawing Rights I I I I I I I I I I I I Page I I I PREFACE I The Auditor General of Pakistan conducts audits subject to Articles 169 and 170 of the Constitution of the Islamic· Republic of Pakistan, 1973 read with Sections 8 and 12 of the I Auditor General's (Functions, Powers and Terms and Conditions of Service) Ordinance, 2001. The audit of "Additional Financing for the Social Safety Net Project" under Benazir Income I Support Program Credit No. 5042-PK for the Financial Year 2013-14 funded by the International Development Association (IDA) was carried out accordingly. I The Directorate General Audit, (Federal Government), Islamabad conducted audit of the "Additional Financing for the Social Safety Net Project" during November, 2014 for the period 2013-14 with a view to reporting significant findings to stakeholders. Audit examined the I economy, efficiency and effectiveness aspects of the "Additional Financing for the Social Safety Net Project". In addition, Audit also assessed, on test check basis whether the management I complied with applicable laws, rules and regulations in managing the "Additional Financing for the Social Safety Net Project". The Audit Report indicates specific actions that, if taken, will help the management realize the objectives of the "Additional Financing for the Social Safety I Net Project". The Report consists of two parts. Part-I contains Auditor's Report (Audit Opinion) and Financial I Statements. Part-II contains Executive Summary, Management Letter and Audit Findings. I The Report has been prepared for submission to the International Development Association (IDA) in terms of Credit No. 5042-PK. I I Dated: 25.11.2014 Place: Islamabad I I I I I I 21Page I I PART-I I 1. PROJECT OVERVIEW 2. AUDITOR'S REPORT TO THE MANAGEMENT I 3. FINANCIAL STATEMENTS I I I I I I I I I 1 1 I I I -· I 31Page I I PROJECT OVERVIEW I Name of Project: Additional Financing for the Social Safety Net Project I Sponsoring Authority: International Development Association (IDA) Executing Authority: Benazir Income Support Program (BISP) I Credit No.: IDA-5042-PK Project Cost: SDR 96,700,000 (equivalent to US$ 150.000 million) I Date of Commencement: 26.03.2012 (As per Financing Agreement) Actual Date of Commencement: 15.05.2012 (As per PAD) I Date of Completion: 30.06.2016 The Government of Pakistan entered into a Financing Agreement with International I Development Association (IDA) till 30.06.2016, for a sum not exceeding SDR 96,700,000 (equivalent to US$ 150.000 million) for Additional Financing for Social Safety Net Technical I Assistance Project under Benazir Income Support Program (BISP). The objectives of the project are as under: I 1. To support the expansion and strengthening the administration and performance of the Recipient's safety net with particular focus on BISP as the national safety net I platform. ·- 11. To support BISP by providing Basic Cash Transfers to approximately six_million I eligible beneficiaries selected pursuant to the Poverty Scorecard Mechanism. iii. To develop the institutional capacity of BISP, other agencies of the Recipient, I and/or BISP's partner organizations/entities, in order to develop and implement the Waseela-e-Taleem Program. I I I I I I 41Page I I I AUDITOR'S REPORT TO THE MANAGEMENT I Auditor's Report on the Additional Financing for the Social Safety Net Project Financial Statements I We have audited the accompanying Financial Statements of "Additional Financing for the Social Safety Net Project" under Benazir Income Support Program IDA Credit No. 5042-PK that I comprises Statement of Receipts and Payments together with the Notes forming part thereof for the year ended 30th June, 2014. I Management Responsibility It is the responsibility of the project management to establish and maintain a system of internal I controls, and prepare and present the Statement of Receipts and Payments in conformity with the requirements of Cash Basis IPSAS Financial Reporting under the Cash Basis of Accounting Standard. I Auditor's Responsibility The responsibility of the auditor is to express an opinion on the financial statements based on the I audit conducted. We conducted our audit in accordance with the International Standards of Supreme Audit Institutions. These standards require that we plan and perform the audit to obtain I reasonable assurance whether the financial statements are free of material misstatements. 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 I and significant estimates made by the management, as well as evaluating the overall statement presentation. We believe that the audit evidence we have obtained is sufficient and appropriate to I provide a basis for our qualified audit opinion. Basis for Qualified Audit Opinion I Based on our audit, we report that: I 1. 11. Unverifiable payments made to benefici~es - Rs. 714.514 million. Regulations for disbursement of funds under Waseela-e-Taleem not approved - Rs. I 111. 88. 730 million. Irregular payment of comrruss1on to Banks/Post Office and Non-deduction of I Advance Tax on commission - Rs. 1.404 million. I I I 5IPage I I Qualified Opinion I In our opinion, except for the possible effects of the matters described in the Basis for Qualified Opinion paragraph: I a) The financial statements present fairly, in all material respects, the cash receipts and payments by the project for the year ended 30th June, 2014 in accordance with Cash Basis I IPSAS Financial Reporting under the Cash Basis of Accounting Standard. b) The expenditures have been incurred in accordance with the requirements of legal I agreement. I REHMAN) I Direct r eral Directorate General Audit (Federal Government), Benevolent Fund Building, Zero Point, Islamabad. I Dated: 25.11.2014 I I I I I I I I I I 6 1Page I I FINANCIAL STATEMENTS 71Page I - - - - - ------ - - - - - - BENAZIR INCOME SUPPORT PROGRAMME Additional Financing for Social Safety Net Project (SSNP) - IDA CREDIT# 5042 Statement of Cash Receipts and Payments For the year ended June 30. 2014 FY-2013-2014 FY-2012-2013 (Rupees in Million) (US$ in Million) (Rupees in Million) (US$ in Million) NOTES Receipts/ Payments Payments by Receipts I Payments Payments by Receipts I Payments Payments by Receipts I Payments Payments by Controlled by Third Parties Controlled by BISP Third Parties Controlled by BISP Third Parties Controlled by BISP Third Parties BISP RECEIPTS I Receipts from IDA - AF I 3 I II 11 II - II 5,742.35611 11 59.382 II -I TOTAL RECEIPTS 5,742.356 59.382 PAYMENTS Commission 4-1 1.276 0.013 116.094 1.179 Cash Transfer {Phase-II) - Benazir Debit Card 4-2-1 697.687 7.088 3,944.595 40.061 Cash Transfer (Phase-II) - Phone to Phone 4-2-2 16.826 0.171 - - CCT-Waseela-e-Taleem 4-3 83.912 0.853 - - Training - Waseela-e-Taleem 4-4 4.797 0.049 - - TOTAL PAYMENTS 804.498 8.173 4,060.689 41.240 Net payments 804.498 8.173 4,060.689 41.240 Net Receipts 5,742.356 59.382 Increase/Decrease in cash I {804.498)11 11 (8.173)11 - 11 .-I .66--.1 ---1.68-1- II 11 18.142 II I Cash at the beginning of the Year 1,681.667 18.142 Increase/Decrease in cash {804.498) {8.173) _ I 1,681.667 18.142 Cash at the end of the year I 877.16911 11 9.96911 II 1,681.661 II 11 is.142 II -I ·yy~- _!.- ) ,.'b SARDAR 1'TJY> \r:.~.. ;j) • .t:.~r.-::.£t ?_,·-;.~':'-er - ~~~~~es~ A~dS T.>irectoiro:.te (i-;:;;2'!!'~1 Audit F -II i Federal Gcvernment ISLAMABAD ~1<' (f_~ {,o~ s-\$· ~,~-A'-"~ ~·~ ~o ..:. . . &rte(~ Ehsanullah Cheema BISP Deputy Director (Finance and Accounts) BISP ------ ---------- - BENAZIR INCOME SUPPORT PROGRAMME Additional Financing for Social Safety Net Project (SSNP) - IDA CREDIT# 5042 cash Flow Statement For the Financial Year July 01. 2013 to June 30. 2014 Notes FY-2013-14 FY-2012-13 Rs. In Millions US$ In Millions Rs. In Millions US$ In Millions cash inflow from Stakeholders Financing I Receipts from IDA • AF I 3 .....____ _ _-___. I - I I 5,742.356 I s9.3s2 I TOTAL RECEIPTS 5,742.356 59.382 cash outflow from Operating Activities Commission 4-1 1.276 0.013 116.094 1.179 Cash Transfer (Phase-II) - Benazir Debit Card 4-2-1 697.687 7.088 3,944.595 40.061 Cash Transfer (Phase-II) - Phone to Phone 4-2-2 16.826 0.171 - - CCT-Waseela-e-Taleem 4-3 83.912 0.853 - - Training - Waseela-e-Taleem 4-4 4.797 0.049 - - TOTAL PAYMENTS 804.498 8.173 4,060.689 41.240 Increase/Decrease in cash (804.498) (8.173) 1,681.667 18.142 cash atthe beginning of the Year 1,681.667 18.142 Cash atthe end of the year 877.169 9.969 1,681.667 18.142 ~· eG~ ~~· SARDAR r.1~";1_1,._~~- _/ . f'~~,,..~G -~~: ~~ ~ ~ ~~ .> /J~ IT. ~Q ;., ~ .1·.~ ;) - -· :-'",.. p._ • ' , 1 • ,~~~ Ehsanullah Cheema , t • • ·~· \?' BISP Dtrectornte Gc;.~e::!ll Audit Dep~~ector (Finance and Accounts) Federal GGvemment 1si.AMABAD ~ BISP Additional Financing for Social Safety Net Project (SSNP) - IDA CREDIT# 5042 NOTES TO THE FINANCIAL STATEM ENT I. THE PROJECT FOR THE PERIOD ENDED JUNE 30, 2014 1.1 To support the expansion and stregthen the administration and performance of the Social Safety Net Technical Assistance Project focus on Benazair Income Support Programme, Government of Pakistan has entered into agreement for Additional Financing with" International Development Association (IDA)" effective from May 28, 2012 with closing date of June 30, 2016. The Additional Financing would provide additional support to the original project Components 1, 2,3 and 4, which are as follows: Component 1: Establishment of a National Targeting System I Component 2: Strengthening Safety Net Operations Component 3: Enhance Safety Net Program, and Management Accountability and Evaluation Component 4:Advancing the Social Protection Policy and Strategy Monitoring 1.2 In accordance with Development Credit Agreement IDA has sanctioned credit of Special Drawing Rights (SOR 40.2 Million) , a loan of US$ 60 million (original)+ US$ 150 Million AF= US$210 million to GoP for the Project. 1. SIGNIFICANT ACCOUNTING POLICIES Following accounting policies have been applied in dealing with items, which are considered material to Additional Financing of Social Safety Net Technical Assistance Project financial statements 2.1 BASIS OF PREPARATION The financial statement has been prepared in accordance with International Public Sector Accounting Standard (IPSAS) Cash I Basis. 2.2 ACCOUNTING CONVENTION I These financial statements have been prepared under the historical cost convention with cash basis of accounting. Accordingly, expenses are reccognized when paid rather incurred. 2.3 CURRENCY I The financial statements have been prepared in equivalent Pak Rupees as per the SBP exchange rate prevailing on the date of the bank payment. The financial statements have been prepared in Pak Rupees except a Special Account Statement on prescribed format and a statement called SOE Withdrawal Schedule, which contains detail information regarding replenishment of account. I 2.4 GOODS / PHYSICAL ASSETS Fixed Assets are stated at cost. I 2.5 GOVERNMENT FUNDS & GRANT Funds allocated to Project from Government & Donor Agencies are not recognized till these have been accounted for by the State Bank of Pakistan against the Special Account maintained with the National Bank of Pakistan, Civic Centre Branch, Islamabad. I No future related funding commitments have been recognized against any financing source. 2.6 FOREIGN EXCHANGE TRANSACTIONS I Transaction in local and foreign currencies is accounted for in compliance with the Finance Division. These are translated using the spot exchange rate on the date of transaction. I 2.7 PROVISIONS Due to cash basis of accounting, no provision is recognized in the financial statements. However, if there is any event I which may have a legal or other obligation with contingent financial implications, then it is identified by a separate disclosure in the notes to the financial statements. 2.8 OFFSEmNG I Neither assets-liabilities nor fund flow & expenditure have been set off in the financial statements. lh1 ~o/'b Director: BISP Fed~ ernment Deputy Director (Finance and Accounts) i:SLAMABAD BISP Ehs:11.rr.ulle" {;heema DepvtyD, Benazir · :3mme Goti Islamabad I BENAZIR INCOME SUPPORT PROGRAMME Additional Financing for Social Safety Net Project (SSNP) - IDA CREDIT# 5042 NOTES TO THE FINANCIAL STATEMENT For the year ended June 30. 2014 FY-2013-2014 FY-2012-2013 Receipts Pak Rs. I USO Pak Rs. I USO Note3 Receiots from /DA - AF I First Installment Second Installment 2,299,035,795 1,992,369,156 24,372,655 20,268,211 I Third Installment Total IDA Receipts 1,450,951,385 5,742,356,336 14,741,141 59,382,007 I I I I I I I I &((((/ff{(« Ehsanullah Cheema BISP Deputy Director {Finance and Accounts) BISP Direc1 - r Fede:rn.i Benazir Incomes, Pro. ~mmt Govemmen~ Pakistan Islamabad I· BENAZIR INCOME SUPPORT PROGRAMME Additional Financing for Social Safety Net Project (SSNP) - IDA CREDIT# 5042 NOTES TO THE FINANCIAL STATEMENT For the vear ended June 30, 2014 Note-4 FY-2013-2014 FY-2012-2013 (Rupees in Million) (US$ in Million) (Rupees in Million) (US$ in Million) 4-1 Commission Bank Ai Falah 18,000,000 182,789 United Bank Ltd 1,185,864 12,047.95 34,200,000 347,300 Habib Bank Ltd 36,000,000 365,579 Post Office 21,996 223.47 3,841,524 39,025 Summit Bank 3,600,000 36,572 Tameer Bank 68,064 691.51 18,000,000 182,860 Sindh Bank 2,452,590 24,916 1,275,924 12,962.93 116,094,114 1,179,041 I 4-2 Cash Transfer !Phase-Ill 4-2-1 Benazir Debit Card (BDC) M/s UBL Islamabad 1,150,766,178 11,685,611 M/s Summit Bank 697,687,200 7,088,249.67 120,000,000 1,219,064 M/S Sindh Bank 81,753,000 830,518 M/S Bank Al Falah 600,000,000 6,092,985 M/s HBL Islamabad 1,200,000,000 12,185,970 I M/s Tameer Bank Cheif Post Master GPO Islamabad 697,687,200 7,088,249.67 600,000,000 192,076,200 3,944,595,378 6,095,319 1,951,273 40,060,739 I 4-2-2 Phone ta Phone (P to P) M/s UBL Islamabad M/s Summit Bank - 16,826,400 170,950.14 M/S Sindh Bank - I M/S Bank Al Falah M/s HBL Islamabad M/s Tameer Bank - - - - I 4-3 Cheif Post Master GPO Islamabad Waseela-e-Taleem 16,826,400 170,950.14 M/s UBL Islamabad 59,293,200 602,397.47 I M/s Summit Bank M/S Sindh Bank M/S Bank Al Falah - - 20,115,600 - - 204,367.22 M/s HBL Islamabad - - I M/s Tameer Bank Cheif Post Master GPO Islamabad 3,403,200 1,099,800 83,911,800 34,575.28 11,173.57 852,513.55 I 4-4 Training- cq !Waseela Taleem ._IM..;.a_nt;..;..ec_&_A_R...,c_ _ _ _ _ __,l ----'4,_79_6"'"",6_4o_,l ._I 4,796,640 .._I_ _ 4_8"'"",1_3_2._B~l ...-----~I 48,732.13 I . . _ I_ _ _ __ , I !Total Expenditure 804,497,964 8,173,408.41 4,060,689,492 41,239,779 NOTE 1. During FY 2012-13, following cheques were issued on account of Waseela·e· Taleem Bank Alfalah Rs.l,819,392 I UBL Post Office Rs.10,766,178 Rs.206,244 2. Later on cheque of Bank Alfalah was cancelled and amount of UBL and Post if: Office was tarnsfered for BOC payments and accordingly finanacial statement for FY 2012·13 was rectified. ~Yb BISP SARD~~V A-v. Director£!~·~ . it Deputy Director (Finance and Accounts) BISP ... .,a Federal 0.. ISLAl\' Benazlr 1'1COml wme Govemmen ;,tan Islamabad ACKNOWLEDGEMENT We wish to express our appreciation to the Management and staff of Benazir Income Support Program for the assistance and cooperation extended to the auditors during this I assignment. I I I I I I I I I I I I 21 IPage I