WORLD BANK PROJECTS YEAR ENDED 21 DECEMBER 2017 SUREEAUDIT O-FFICE FISALYEAR 1396 Supreme Audit Office Government of Islamic Republic of Afghanistan Auditor's Report To, Date: 11 September 2018 HE Minister of Finance, Government of Islamic Republic of Afghanistan Kabul 4>X Independent Auditors' Report on the Fina in Statements 1. We have audited the accompanying statements of Cash Receipts and Payments (the "Financial Statements") of the Afghanistan Pension Administration and Safety Net Project bearing World Bank Project ID number Pl13421 financed under Grant Number H-523 and H-848 (hereinafter referred to as the "Project") for the year ended 30 Qaws of Solar Year 1396 (21 December 2016 to 21 December 2017), and a summary of significant accounting policies and other explanatory notes forming part of the Financial Statements. The Ministry of Finance's Responsibility for the Financial Statements and Compliance with Grant Agreement 2. The Ministry of Finance (the "Ministry") is responsible for preparation and fair presentation of the Financial Statements in accordance with International Public Sector Accounting Standard "Financial Reporting under the Cash Basis of Accounting." This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the financial statements which are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. 3. In addition to the responsibility for the preparation and presentation of the financial statements described above, the Ministry is also responsible for ensuring that the activities, financial transactions and information reflected in the financial statements are in compliance with the Grant Agreement H-523 and H-848 dated July 23, 2013 entered into between the Islamic Republic of Afghanistan and the International Development Page 1 of3 Association acting as administrator of grant funds for the provision of USD 12.500 Million funding to the Project. Auditor's Responsibility 4, Our responsibility is to express an opinion on these Financial Statements based on our audit. We have conducted audit of the financial statements, project operations and related internal controls in accordance with International Standards of Supreme Audit Institutions ("ISSAls"). Those Standards require that SAO comply with ethical regulations and plan and perform the audit to obtain reasonable assurance of the financial st ei"ts being free from material misstatement. Those standards require that SAO eXress its opinion on whether the financial statements present fairly, in all material re#ets, the cash receipts and payments of the project. 5. In addition to the responsibility to express an opinion on the finanat tatements described above, our responsibility includes expressing an opinion on ther the activities, financial transactions and information reflected in the financial .4atements are, in all material respects, in compliance with the Project's Grant Agreement. This responsibility includes performing procedures to obtain audit evidence about whether all payments and receipts are in compliance with the terms and conditions of Grant Agreement. 6. An audit involves performing procedures to obtain reasonable and appropriate audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making the risk assessments, internal controls relevant to the entity's preparation and presentation of financial statements are considered in order to design audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of internal controls. An audit also includes evaluating the appropriateness of accounting policies used, the reasonableness of accounting estimates made by management, as well as evaluating the presentation of the financial statements. 7. We believe that the audit evidence we have obtained is reasonable and appropriate to provide a basis for our opinion. Opinion 8. In our opinion the Financial Statements present fairly, in all material respects, cash receipts and payments of the Afghanistan Pension Administration and Safety Net Project bearing World Bank Project ID number P113421 financed under Grant Number H-523 and H-848 for the year ended 30 Qaws of Solar Year 1396 (21 December 2016 to 21 December 2017) in accordance with International Public Sector Accounting Standard "Financial Reporting under the Cash Basis of Accounting." 9. In our opinion, in all material respects, the activities, financial transactions and information reflected in the financial statements are in compliance with the terms and conditions of Project's Grant Agreement. Page 2 of 3 10. Management Letter, attached to this Audit Report, highlights areas of improvement in financial management including compliance with financial covenants of the Grant Agreements and of results of its operations for the 30 Qaws of Solar Year 1396 (21 December 2016 to 21 December 2017). These observations and recommendations have been communicated to and discussed with the Project and are intended to improve internal controls and result in other operating efficiencies of the Project. h Dr. Mohamm Sharif Sharifi Auditor Gener of Afghanistan pr e Audt Office a ul oanistan Page 3 of 3 Islamic Republic of Afghanistan Afghanistan Pension Administration and Safety Net Project World Bank Reference: Project ID P113421; Grant ID H5230 & H8480 Financial Statements for the year ended 30th Qaws, 1396 (21t December, 2017) Afghanistan Pension Administration and Safety Net Project World Bank Reference: Project ID P113421; Grant ID H5230 & H8480 STATEMENT OF CASH RECEIPTS AND PAYMENTS FOR THE YEAR ENDED 30 QAWS 1396 (21 DECEMBER 2017) 1396 1395 Cumulative To Receiptsl Receipts Date Payments Payments Controlled by Controlled by entity e Jty USD USD USD RECEIPTS Initial Advance 1,950,000 Direct Payments 108,842 Replenishments 3,393, 6 3,394,343 16,154,073 Taxes collected to be transferred (8 ) 12,267 11,372 TOTAL RECEIPTS 3,392,431 3,406,610 - 18,224,287 PAYMENTS Disbursement Category: Goods, Works, Consultant's Services & Incremental Operations Costs 4,026,558 3,695,867 17,805,569 Pilot Benefits Under Part 2A(Ii) - 7,560 Project Preparation Advance - 181,015 Refund to Donor 4,076 4,076 Bank Charges 200 200 1,425 TOTAL PAYMENTS 4,026,758 3,700,143 17,999,645 Excess of Receipts over Payments (634,327) (293,533) 224,642 Taminat (Net) 34,564 90,162 Increase/(Decrease) in Cash & Cash Equivalents (634,327) (258,969) 314,805 Cash and Cash Equivalaents at the beginning of the year 949,132 1,208,101 Increase/(Decrease) in Cash (634,327) (258,969) Cash and Cash Equivalents at the end of the year 314,805 949,132 The accompanyin form a te al part of this financial statement. Khalid Payen Deputy Minister fo a Ministry of F e Isla fghanistan Dated: September 4, 2018 Afghanistan Pension Administration and Safety Net Project World Bank Reference: Project ID P113421; Grant ID H5230 & H8480 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 QAWS 1396 (21 DECEMBER 2017) 1) LEGAL STATUS AND ACTIVITY a) The Afghanistan Pension Administration and Safety Net Project was set up in November 2009. The project's objective is to: (i) improve administration of public schemes; and (ii) pilot a modest social safety net program as a first step to developing a sustainable approach to safety nets in the country, b) The project is financed by a grant bearing reference number H5230 frorlh1nternational Development Association in the amount of SDR 4,900,000. Another gr ait bearing reference number H8480 in the amount of SDR 8,300,000 was provided in July l1. c) The project consists of the following Parts: i) Pensions ii) Safety Nets iii) Project Management d) The significant terms and conditions that determine or affect the availability of the funding assistance are primarily the presentation of eligible expenditures to donor within the period as per and in accordance with the financing agreement. e) These financial statements of the Afghanistan Pension Administration and Safety Net Project have been prepared in accordance with the requirements of the Grant Agreement signed between the Government of the Islamic Republic of Afghanistan and the International Development Association in November 2009. 2) SIGNIFICANT ACCOUNTING POLICIES a) Basis of Preparation The financial statements are prepared under the historical cost convention and in accordance with Cash Basis IPSAS - Financial Reporting under the Cash Basis of Accounting issued by International Federation of Accountants (IFAC). b) Reporting Entity These financial statements are for the Project referred to in para 1(a) which is funded by the grants as specified in para 1(b) and encompass the operations of the project to the extent funded by those grants. c) Payments Payments made from Special Account are recognised in the financial statements based on the date the cheque is issued and direct payments by World Bank are recognised on the date on which the withdrawal application for the payment is submitted to the World Bank. However, cheques or withdrawal applications that were ultimately rejected by the bank or the World Bank are reversed in the reporting period, Afghanistan Pension Administration and Safety Net Project World Bank Reference: Project ID P113421; Grant ID H5230 & H8480 d) Currency translations Transactions in currencies other than the reporting currency are translated into US Dollar at the rate of exchange at which the transaction is actually executed. 3) NOTES TO ACCOUNTS a) Receipts These represent grants and aid received during the period and the amount of taxes collected but not transferred until the end of the financial year. b) Initial Advance Initial advance represents the advance given by the World Bank to open the special account less withdrawal applications approved by the World Bank but not paid to the special account because they were directed toward a reduction in the Initial advance. c) Reporting Currency The reporting currency is US Dollars. Since US Dollars is the principal dis ursement currency of the donor, the financial statements are not prepared in the Afghani wpich is the currency of Afghanistan. d) Bank Charges The Ministry of Finance has negotiated with Da Afghanistan Bank tha charges will not be charged on the transactions in the US Dollar Special bank accou f the grant. Bank Charges may be levied by intermediary banks on deposits into the Sp ai Account and balances returned to the World Bank. e) Comparison of Budget and Actual Amounts The Project, being the reporting entity for the purpose of these financial statements, in its capacity as such does not make its annual approved budget publicly available nor is its budget explicitly available publicly in the compiled approved budget in a manner purposeful to the context of these financial statements. Thus, the requirement of presenting a comparison of budget and actual amounts is not considered contextually applicable, f) Payments made by third parties These represent payments directly made by the World Bank, on basis of requests submitted by the Ministry of Finance in form of a withdrawal application, towards settlement of the claims, liabilities and contractual obligations against contracts and agreements for eligible expenditures of the project as per the financing agreement. These payments do not constitute cash receipts or payments by the entity and as such are disclosed in the 'Payments by Third Party" column in the statement of Cash Receipts and Payments. g) Authorisation Date These Financial Statements are authorised by the Deputy Minister for Finance, Ministry of Finance or any official acting on his behalf who has been so authorised to act on the date endorsed on the Statement of Cash Receipts and Payments. Afghanistan Pension Administration and Safety Net Project World Bank Reference: Project ID P113421; Grant ID H5230 & H8480 h) Appendices The accompanying appendices provide additional information and analysis and form an integral part of these notes, except as indicated otherwise. i) Others These Financial Statements are originally prepared in English and then translated into Dart. In the event of any inconsistency between the English and Dari versions, the English version shall be considered to be correct. Af2hanistan Pension Administration and Safety Net Project World Bank Reference: Project ID P113421; Grant ID H5230 & H8480 APPENDIX Al SUMMARY OF WITHDRAWAL APPLICATIONS FOR THE YEAR ENDED 30 QAWS 1396 (21 DECEMBER 2017) Initial Description Application Number Advance Amount USD USD H8480 DA-2 24 856,094 DA-2 23 401,464 DA-2 22 475,643 DA-2 20 458,729 DA-2 21 66,817 DA-2 19 619,843 DA-2 18 114,974 DA-2 17 399,763 Afghanistan Pension Administration and Safety Net Project World Bank Reference: Project ID P113421; Grant ID H5230 & H8480 APPENDIX A2 US Dollar SPECIAL ACCOUNT SUMMARY FOR THE YEAR ENDED 30 QAWS 1396 (21 DECEMBER 2017) Depository Bank: Da Afghanistan Bank (DAB) Address: Kabul A/C # 27532 USD Opening Balance as per Bank Statement 950,237 Add: Replenishments 3,393,326 Total Additions 3,393,326 Deduct: Payment for Project Expenses 4,027,453 Debit against amount incorrectly debited to other account 1,105 Bank Charges 200 Total Deductions 4,028,758 Closing Balance as per B.S 30 QAWS 1396 (21 DECEMBER 2017) 314,805 Afghanistan Pension Administration and Safety Net Project World Bank Reference: Project ID P113421; Grant ID H5230 & H8480 APPENDIX A3 US DOLLAR SPECIAL ACCOUNT RECONCILIATION FOR THE YEAR ENDED 30 QAWS 1396 (21 DECEMBER 2017) Depository Bank: Da Afghanistan Bank (DAB) Address: Kabul USD Closing Balance as per bank statement - 30 QAWS 1396 (21 DECEMBER 2017) A/C No. 27532 314,805 Closing balance as per financial statements - 30 QAWS 1396 (21 DECEMBER 2017) 314,805 Afghanistan Pension Administration and Safety Net Project World Bank Reference: Project ID P113421; Grant ID H5230 & H8480 APPENDIX A4 COMPONENT-WISE DISBURSEMENTS FOR THE YEAR ENDED 30 QAWS 1396 (21 DECEMBER 2017) (Memorandum Statement - not an integral part of the Financial Statements) 1395 1396 Components Pension 1,408,918 712,503 Safety Nets 1,890,552 2,862,553 Capacity Building and Project Management 396,397 451,502 Bank Charges 200 200 TOTAL PAYMENTS 3,696,067 4,026,7i � � W R С7 6Q7 Р^� � Ф�О х сз sr ва ев оо м с+� er � _ � г � сэ си й а r�-. � о �' у � � с� � n c�r о �+r в� С � ° Ё �:�t о� г еж` �• с��д � с F� м� т п +� � ч= ° ч,� N С] � Х Х Х �� С�7 � С3 {1} � О ?С � с3а � о ц7 сл N вт �r- �с ,С ur -Q � б[�+°i � S,�Cr N� �.�....��57 О СС7 С у��р _..._. 4i � CQr7 � � �� 1+�. 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