Vietnam Inclusive Innovation Project Credit Agreement No.5249-VN Contents Part I Combined financial statements 1 Report of the Project Management Unit 2 Independent Auditors' Report 4 Balance sheet 6 Statement of Sources and Uses of funds 7 Statement of Designated accounts 8 Statement of loan withdrawals 10 Notes to the combined financial statements II Part II Auditors' Report on the Compliance i8 Part III Auditors' Report on the Internal Control 21 Vietnam Inclusive Innovation Project Credit Agreement No.5249-VN Part I Combined financial statements Vietnam Inclusive Innovation Project 2 Credit Agreement No.5249-VN Report of the Project Management Unit The Project Management Unit ("PMU") submits its report together with the audited combined financial statements of the Vietnam Inclusive Innovation Project - Credit Agreement No.5249-VN ("the Project") for the year ended 31 December 2015. Auditors The combined financial statements for the year ended 31 December 2015 have been audited by Grant Thornton (Vietnam) Limited. Project Management Unit The members of the PMU responsible for overall direction and management of the Project during the year and to the date of this report were: Name Position Date appointed Mr Nguyen Hoa Cuong Director 28 March 2013 Ms Bui Thu Thuy Deputy Director 28 March 2013 Mr Nguyen Quang Vinh Senior Accountant 28 March 2013 Ms Trinh Thi Huong Member 28 March 2013 Ms Nguyen Thi Le Quyen Member 28 March 2013 Statement of the Project Management Unit The Project Management Unit is responsible for preparing combined financial statements for the year ended 31 December 2015 which give a true and fair view of: * the financial position of the Project; * the funds received and expended for the year; * the activities of the designated accounts for the year and the balance of these accounts as at 31 December 2015; and * the funds withdrawn for the year. In preparing those combined financial statements, the Project Management Unit is required to: * select suitable accounting policies and then apply them consistently in accordance with the Credit Agreement No.5249-VN between Socialist Republic of Vietnam and International Development Association ("IDA") and the Project's Financial Management Manual; * make judgements and estimates that are reasonable and prudent; * state whether applicable accounting principles have been followed, subject to any material departures disclosed and explained in the combined financial statements; and * design and implement an effective internal control system for the purpose of properly preparing and presenting the combined financial statements so as to minimise errors and frauds. Vietnam Inclusive Innovation Project 3 Credit Agreement No.5249-VN The Project Management Unit confirms that they have complied with the above requirements in preparing the combined financial statements. The Project Management Unit is responsible for ensuring that proper accounting records are kept which disclose, with reasonable accuracy at any time, the financial position of the Project and to ensure that the accounting records comply with the accounting system as described in the Project Implementation Manual. 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. Approval of the combined financial statements We hereby approve the accompanying combined financial statements on pages 6 to 18 which give a true and fair view of the fund balance of the Project as at 31 December 2015, the movement and balance of the designated accounts for the Credit fund as at 31 December 2015 and the funds received and disbursed for the year then ended, in accordance with the accounting policies as described in Note 2 to the combined financial statements and in the opinion of the PMU the loan withdrawals have been adequately reconciled to the statements of expenditure prepared by the rrower during the period, and such statements of expenditure were adequately supported. (N oui . on behalf of the Pro' nagement Unit. guyen Hoa Cuong Director Hanoi, Vietnam 29 June 2016 4 GrantThornton Independent Auditors' Report on the combined financial statements of Vietnam Inclusive Innovation Project Credit Agreement No.5249-VN for the year ended 31 December 2015 Grant Thornton (Vietnam) Limited 18th Floor, Hoa Binh tntnmaional Office Building 106 Hoang QuO Viet Street Cau Glay District, Hano Vietnam T 44 (4) 3850 1686 F 44 (4) 38501688 wWW.gt.com.vn No. 14-11-197-02 To: The Project Management Unit We have audited the accompanying combined financial statements of Vietnam Inclusive Innovation Project ("the Project") under Credit Agreement No.5249-VN between the Socialist Republic of Vietnam and International Development Association ("IDA"), prepared on 29 June 2016, including the balance sheet as at 31 December 2015, the statement of sources and uses of funds, statement of designated accounts and statement of loan withdrawals for the year then ended and the notes thereto, as set out on pages from 6 to 18. Project Management Unit's responsibility for the combined financial statements The Project Management Unit is responsible for the preparation and fair presentation of these combined financial statements in accordance with accounting policies as described in Note 2 and for such internal control as management determines is necessary to enable the preparation of combined financial statements that are free from material misstatement, whether due to fraud or error. Auditors' responsibility Our responsibility is to express an opinion on these combined financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Project Management Unit's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Project Management Unit, as well as evaluating the overall presentation of the statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Grant Thornton (Vietnam) Limited A member of Grant Thornton International Ltd ('GTIL'). GTIL and the member firms are not a worldwide partnership. Services are detivered independently by the member firms. GrantThornton Auditors' opinion In our opinion, in all material respects: - The accompanying combined financial statements give a true and fair view of the financial position as at 31 December 2015 as well as of the funds received and expenditures of the Project for the year then ended in conformity with the accounting policies described in Note 2 of the Notes to the combined financial statements. - The accompanying statements of designated accounts give a true and fair view of the balance of the designated accounts as at 31 December 2015 and the Project's receipts and disbursements via these designated accounts for the year ended 31 December 2015 in conformity with the relevant covenants of Credit Agreement No.5249-VN, the Project Financial Management Manual and relevant regulations established by the World Bank. - Withdrawal Applications were adequately reconciled to the statements of expenditures ("SOEs") prepared by the Project Management Unit for the year ended 31 December 2015 and those SOEs were adequately supported by accounting vouchers. T THORNTON (VIETNAM) LIMITED CON4G TY '- GRAT THORNTON (tt TNA M). L; & . yen Hong Ha Auditor's Practicing Certificate No. 1710-2014-068-1 Deputy General Director Pham Thu Trang Auditor's Practicing Certificate No. 2072-2014-068-1 Auditor Hanoi, Vietnam 29 June 2016 @2016 Grant Thornton (Vietnam) Limited. All rights reserved, Vietnam Inclusive Innovation Project 6 Credit Agreement No.5249-VN Balance sheet Note 31 December 2015 31 December 2014 USD VND USD VND ASSETS Cash Cash on hand 567.74 12,796,750 1,154.19 24,443,000 Cash at bank 9 4,632,212.68 104,410,073,889 640,229.64 13,684,908,555 4,632,780.42 104,422,870,639 641,383.83 13,709,351,555 Current assets Other receivables 10 21,661.62 488,027,610 TOTAL ASSETS 4,654,432.04 104,910,898,249 641,383.83 3,709,351,555 RESOURCES Liabilities Tax payable to State Budget 1,124.91 25,355,610 96.51 1,980,000 Other payables 11 1,108.48 24,985,048 390.65 8,310,169 2,233.39 50,340,658 487.16 10,290,169 Fund balance Fund balance carried forward from prior year 640,896.67 13,699,061,386 - - Surplus of resources over uses of funds 4,011,301.98 91,161,496,205 640,896.67 13,699,061,386 Fund balance carried forward 4,652,198.65 104,860,557,591 640,896,57 13,699,061,386 TOTAL RESOURCES 4,654,432.04 104,910,898,249 641,383.83 13,709,351,555 NguHyeHoCunDonTiTaha D eBAN cU tor Se A ccounatnn The u 16 * WD d AG T 0* 0 t4UG1 TPU 4114 HA ' Nguyen Hoa Guong Doan Thi Thanh H-a Director Senior Accountant The notes set out on pages from 11 to 18 an integral part of these combined financial statements. Vietnam Inclusive Innovation Project 7 Credit Agreement No.5249-VN Statement of Sources and Uses of funds Year ended Accumulated to Note 31 December2015 31 December 2015 USD VNO USD VND SOURCES Credit fund 3 4,614,118.30 103,947,068,085 5,614,115.30 124,983,068,05 Counterpart fund 4 118,099.48 2,661,962,100 228,975.30 5,081,617,265 Others 5 496.93 11,200,919 732.37 16,153,774 4,732,714.71 106,620,231,104 5,843,825.97 130.080,839,124 USES OF FUNDS 6 Consultant 244,409.09 5,415,969,848 431,910.39 9,404,763,110 Workshop and training 260,035.75 5,750,283,300 383,555.51 8,383,169,300 Equipment 47,616.05 1,053,122,600 80,362.73 1,323,122,600 Operating Costs 177,140.49 3,645,022,935 323,051.90 6,806,167,959 Bank charges and costs of bid evaluation en.de 11,403,329 750.44 16,356,164 729,716.38 15,875,802,012 1,199,930.97 26,935,579,153 Foreign exchange difference 8,303.65 417,067,113 8,303.85 715,297,620 Surplus of sources over uses of funds 4,011,301.98 91,161,496,205 4,652,198.65 104,860,557,591 Hanoi, Vietnam e 2016 Ngu a CongDoan Thi Thanhi Ha Senior Accountant The notes set out on pages from 11 to lan integral part of these combined financial statements. Vietnam Inclusive Innovation Project 8 Credit Agreement No.5249-VN Statement of Designated account Project Management Unit For the year period From 1 January 2015 to 31 December 2015 Account Number: 1003950522 Depository Bank: Saigon - Hanoi Commercial Joint Stock Bank - Thang Long Branch Address: No 91 Nguyen Chi Thanh Street, Dong Da District, Hanoi City, Vietnam Credit Agreement: No. 5249-VN Currency: USD USD Part A- Account activity Opening balance as at 1 January 2015 639,723.99 Add: Amount advanced to Designated accounts 614,118.30 Bank charge transferred from interest account 116.00 Less: Amount withdrawn from Designated accounts (707,600.26) Closing balance as at 31 December 2015 546,357.04 Part B- Account reconciliation Amount advanced by World Bank at 1 January 2015 1,000,000.00 Add: Additional advance during the year 459,006.82 Less: Amount recovered during the year (359,006.82) Outstanding amount advanced to the Designated accounts at 31 December 2015 1,100,000.00 Account balance as at 31 December 2015 (Note 9) 546,357.04 Add: Amount withdrawn in 2015 but not yet claimed 552,488.77 Amount withdrawn in 2014 but not yet claimed 1,154.19 . tnding amount advanced to the Designated accounts at 31 December 2015 1,100,000.00 * Y ?ftne 2 Nguyen Hon Cuong Doan Thi Thanh Ha Director Senior Accountant The notes set out on pages from 11 to 16 an integral part of these combined financial statements. Vietnam Inclusive Innovation Project 9 Credit Agreement No.5249-VN Statement of Designated account NAFOSTED For the year period From 1 January 2015 to 31 December 2015 Account Number: 1004328460 Depository Bank: Saigon - Hanoi Commercial Joint Stock Bank - Thang Long Branch Address: No 91 Nguyen Ch Thanh Street, Dong Da District, Hanoi City, Vietnam Credit Agreement: No. 5249-VN Currency: USD USD Part A- Account activity Opening balance as at 1 January 2015 Add: Amount advanced to Designated accounts 4,000,000 Less: Bank charge (4) Closing balance as at 31 December 2015 3,999,996 Part B- Account reconciliation Amount advanced by World Bank at 1 January 2015 Add: Additional advance during the year 4,000,000 Outstanding amount advanced to the Designated accounts at 31 December 2015 4,000,000 Account balance as at 31 December 2015 (Note 9) 3,999,996 Add: Bank charge 4 Outstanding amount advanced to the Designated accounts at 31 December 2015 4,000,000 ctetnam o BAN 09M J1i 16 *iM Md1 SAN" AlO* Nguyen Hoa Cuong Doan Thi Thanh Ha Director Senior Accountant The notes set out on pages from 11 to 18 an integral part of these combined financial statements. 'W CD 0 1 æ * Saa oo 0 O !; u i c Ocm ~C 0 f0f EE næoO o o T 100 * *2 0 - - » o ed o -- g >a uf. 0) U) cn CLQ 0 w- U)LC) CO cn O 0 o o o bC zb rn cn DI 17Ž~(3 0)CiC< £ Vietnam Inclusive Innovation Project 11 Credit Agreement No,5249-VN Notes to the combined financial statements 1 The Project information The Vietnam Inclusive Innovation Project ("the Project") operates under Financing Agreement - Credit No. 5249-VN dated 6 September 2013 signed between the Socialist Republic of Vietnam and the International Development Association (IDA). The objectives of the Project are to adopt, upgrade and develop inclusive innovations for the benefit of the Base of Pyramid population. Enterprises Development Agency is in charge of the Project (the Project owner), to be responsible for the overall planning, coordination, implementation and management of the Project. The Project Management Unit established by Enterprises Development Agency under the Decision No 59/QD-PTDN dated 28 March 2013, is to assist the Project owner in overall coordination and management of the Project implementation. The Project Management Unit ("PMU") is located at No. 6B, Hoang Dieu Street, Quan Thanh Ward, Ba Dinh District, Hanoi City, Vietnam. The Project consists of four components as follows: * Component I: Developing Inclusive Innovation Technologies * Component II: Upgrading and Commercialization of Innovation Technologies * Component III: Capacity Building and Global Knowledge Transfer * Component IV: Project Management and Monitoring & Evaluation (M&E) Project Management Unit of the Department of Business Development is responsible for coordinating and managing the entire operation of the Project. National Foundation for Science and Technology Development (NAFOSTED) takes accounted for implementation of the Part I and the grant from the Component I. Commercial banks nominated will credit for the remaining loan of the Component II. Under the Financing Agreement No.5249-VN signed on 6 September 2013, total fund undertaken for the Project is USD55,625 million, of which IDA will finance USD55 million and the remaining VND12 billion (equivalent to USDO.625 million) is to be financed by counterpart government funding for Enterprises Development Agency. 2 Principal accounting policies Basis of combination of combined financial statements The combined financial statements are prepared by combining the financial statements of the Project Management Unit and National Foundation for Science and Technology Development (NAFOSTED). In this combined financial statements, all receipts and disbursements are added together line by line. Transactions and balances between Project Management Unit and NAFOSTED (if any) are eliminated on combination. Vietnam Inclusive Innovation Project 12 Credit Agreement No.5249-VN Basis of accounting The combined financial statements are expressed in Vietnamese Dong ("VND"), except for the statements of designated accounts and statement of withdrawals which are expressed in United States Dollar ("USD"). These combined financial statements are prepared in accordance with requirements of the World Bank and Decision 19/2006/QD-BTC dated 30 March 2006 issued by the Ministry of Finance of Vietnam and International Public Sector Accounting Standards. The statements are prepared in accordance with the World Bank's financial reporting requirements, the requirements of the above mentioned Credit Agreement and the following accounting principles. The combined financial statements are prepared under the historical cost convention and on cash basis of accounting for financial reporting. Accordingly, receipt is recognized when received rather than when the right to receive the income arises and expenditures are recognised when paid rather than when the obligation to pay them arises. Except for bank interest which is recognized when the obligation to pay them arises. Foreign currency translation Foreign exchange differences are not cash flows. However, the effect of exchange rate changes on cash and cash equivalents is reported separately in the statement of sources and uses of funds in order to reconcile fund balances at the beginning and the end of the period. Bank interest payable In accordance with Circular No. 108/2007/TT-BTC dated 07 September 2007 issued by the Ministry of Finance, the Project can use bank interest earned from the Credit fund to pay for bank charges. The remaining interest earned from the Credit fund accounts after deduction of bank charges is payable to the Government rather than treated as a source of income for the Project. Bank charges and interest used to finance bank charges are recorded as the Project's expenditure and income respectively. Accounting period The Project's accounting period is from I January to 31 December. 3 Credit fund from IDA Year ended Period from 6 December 2013 31 December 2015 to 31 December 2014 USD VND USD VND Advanced to Designated accounts (net) 4,000,000.00 90,160,000,000 1,000,000.00 21,036,000,000 Replenishment to Designated accounts 614,118.30 13,787,068,085 4,614,118.30 103,947,068,085 1,000,000.00 21,036,000,000 4 Counterpart fund Year ended Period from 6 December 2013 31 December 2015 to 31 December 2014 VND VND Operating costs 2,661,962,100 2,419,655,165 5 Other fund Year ended Period from 6 December 2013 31 December 2015 to 31 December 2014 VND VND Bank interest ( 11,200,919 4,952,855 (*) Bank interest from the Designated accounts is used to cover bank charges. 必雜 ’〕〕〕〕〕〕〕〕〕〕〕〕 州？ 于紹 匕－〞計 艮付 編‘ U) w N N u-> c Lo C> to CD LO [- m m N <= r- co c) Q> rý CD o cm cý a; d Cd Cd d 0 w -,r 0 M a) m C> n C) C) cý CD, CD C> -co 0 -0 co m r co <ýl cn m M 0 CD 0 0 LL LO LO Lo &n ci Iqý t Iqý ý. 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E - >0 V to to o o c t r p - < 0 øø ~ ' NNCO to - 03 r w [ O LUtt 0 (D 0 Vietnam Inclusive Innovation Project 16 Credit Agreement No.5249-VN 9 Cash at bank 31 December 2015 31 December 2014 Original currency Original currency (UJSD) V/ND (USO) VND Designated accounts of the Credit fund - PMU 546,357.04 12,314,887,682 639,723.99 13674100,286 Designated accounts of the Credit fund - NAFOSTED 3,999,996.00 90,159,909,840 . Bank account - NAFOSTED 84,493.70 1,904,488,071 - Interest account in US$ - PMU 544.36 12,269,874 505.65 10,808,269 Interest account in US$ - NAFOSTED 768.79 17,328,527 - Interest account in VND - NAFOSTED 62.79 1,189,895 4,632,212.68 104,410,073,889 640,229.64 13684,908,555 10 Other short-term receivables 31 December 2016 31 December 2014 VND VND Personal income tax receivables 18,677,610 Receivables from NAFOSTED (*) 469,350,000 488,027,610 (*) Receivables from NAFOSTED represents expenses for Technical Council in 2015 that were not approved. 11 Other payables 31 December 2015 31 December 2014 VND VND Bank interest () 23,518,198 8,310,169 Others (*) 1,466,850 - 24,985,048 (*) Bank interest is payable to the State Budget at end of the Project, details as below: Year ended For the period from 6 December 2013 31 December 2015 to 31 December 2014 USD VND USD VND Opening balance of bank interest account 505.65 10,808,269 - - Bank interest earned 1,164.45 25,948,030 736.09 15,576,984 Deduction for bank charges (189.16) (4,156,221) (230.44) (4,847,675) Transferred from interest account to designated accounts - bank charge for 1" advance (115.00) (2,479,400) - Foreign exchange differences - 667,618 - 78,960 Closing balance of bank interest account 1,365.94 30,788,296 505.65 10,808,269 Bank charge paid by designated accounts - internationalbankcharge (10.00) (225,400) (115.00) (2,498,100) - Bank charge paid by designated accounts (312.54) (7,044,698) (322.54) (7,270,098) (115.00) (2,498,100) Payable to the State Budget 1,043.40 23,518,198 390.65 8,310.169 Vietnam Inclusive Innovation Project 17 Credit Agreement No.5249-VN (** This amount presents payables to NAFOSTED as NAFOSTED used its own pretty cash to nake payments for the Project's activities. 12 Amounts withdrawn and not yet claimed As at 31 December 2015, certain expenditures were paid from designated accounts but have not been claimed yet as below: Amount in USD Amount withdrawn in 2015 but not yet claimed 552,488.77 Amount withdrawn in 2014 but not yet claimed 1,164.19 553,642.96 Those expenditures will be claimed under applications for loan withdrawals in 2016. 13 Reconciliation of amount on the statement of IDA loan withdrawal to expenditures 2015 Loan USD Total amount per Statement of Loan withdrawals (Note 3) 4,614,118.30 Add: Amount withdrawn not yet claimed in the current year (Note 12) 553,642.96 Tax payables 1,124.91 Less; Amount advanced from World Bank (4,459,006.82) Amount withdrawn and advanced to NAFOSTED (84,493.70) Receivables from NAFOSTED (20,822.98) Exchange rate differences (7,592.64) Total expenditure of credit fund (Note 6) 596,970.03 14 Subsequent event In accordance with the draft Aide Memoire between the World Bank and the Project in May 2016 the Project's operations are in consideration to restructure due to the slow progress of inplementation. At the date of this report, the final Aide Memoite has not been approved and there was not further instruction from World Bank with regard to the said matter. Therefore, the probability that Project's operations can be continued as going concerns or to be restructured as well as any impact of this matter to the current year's combined financial statements are depended on the final decision and the agreement between parties. 15 Approval for issuance of the combined financial statements The combined financial statements were approved by the Board of Management and authorised for issue. DL( AN D I M i SANG TAO Nguyen Hoa Cuong Doan Thi Thanh Ha Director Senior Accountant