Ministry of Natural Resources and Environment Department of Planning and Finance Mekong Integrated Water Resources Management (MIWRM-AF): Additional Financing Project No. P159447/IDA, Credit 61180-LA Financial Statements for the year ended 31 December 2020 and Independent Auditors' Report Ministry of Natural Resources and Environment Department of Planning and Finance Mekong Integrated Water Resources Management (MIWRM-AF): Additional Financing Project No. P159447/IDA, Additional Credit 61180-LA Contents Page Project information 1 Statement of management's responsibilities 2 Independent Auditors' Report 3 -4 Statement of cash receipts and payments 5 Statement of designated bank account 6 Notes to the financial statements 7 - 14 Project information Project name Mekong Integrated Water Resources Management (MIWRM-AF): Additional Financing Project No. P159447/IDA, Additional Credit 61180-LA Funding agencies International Development Association ("IDA") Duration 1 9th April 2012 to 28th February 2022 Project Director Dr. Souksamone Pathammavong Deputy Director General, Project Director Registered office Department of Planning and Finance, Ministry of Natural Resources and Environment, Vientiane Capital, Lao PDR Auditors KPMG Lao Co., Ltd. 10th Floor, Royal Square Office Building, Samsenthai Road, Nongduong Nua Village, Sikhotabong District, P.O. Box 6978, Vientiane, Lao PDR Tel +856 (21) 454240-7 1 Ministry of Natural Resources and Environment Department of Planning and Finance Mekong Integrated Water Resources Management (MIWRM-AF): Additional Financing Project No. P159447/IDA, Additional Credit 61180-LA Statement of Management's Responsibilities It is the responsibility of management to prepare financial statements of the Mekong Integrated Water Resources Management-Additional Financing ("the Project") for the year ended 31 December 2020, which are prepared in all material respect in accordance with the accounting policies as described in Note 2 to the financial statements. In preparing these financial statements, management is required to: * Select suitable accounting policies and apply them consistently; * Make judgments and estimates that are reasonable and prudent; * Maintain financial records and prepare the financial statements based on the accounting policies as described in Note 2; and * Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Project will continue its operations. MIWRM-AF project is responsible for keeping proper accounting records, which disclose with reasonable accuracy, at any time, the financial position of the Project. Members of project management have general responsibility for taking such steps as are reasonably available to them to safeguard the assets of the Project and to prevent and detect fraud and other irregularities. Project Management confirms that the Project has complied with the above requirements in preparing the financial statements. On behalf of the management: Dr. Souksamone Pathammavong Mr. Khamphuang Khammounty Deputy Director General Director of Project Management Division Project Director Project manager Department of Planning and Finance Department of Planning arrd Finance Ministry of Natural Resources and Ministry of Natural Resources and Environmeint, Lao PDR Environment, Lao PDR Date: 7th May 2021 Date: 7th May 2021 KPMG Lao Co., Ltd. riin m '1?Tn 10 Floor, Royal Square Office Building, 11 10, emEl 1S1FQ2:caV Samsenthai Road, Nongduong Nua Village, TroZfl .u n 0r m isicide Sikhotabong District, P.O.Box 6978, c.Dea Thnn zoue , 6 01 6978, Vientiane, Lao PDR O?jer!ial , 21z me Tel +856 (21) 454240-7 ktn: +856 (21) 454240-7 Website home.kpmg/la liajt: home.kpmg/a Independent Auditors' Report To the Project Management, Mekong Integrated Water Resources Management -Additional Financing, Department of Planning and Finance, Ministry of Natural Resources and Environment. Opinion We have audited the financial statements of the Mekong Integrated Water Resource Management-Additional Financing ("MIWRM-AF" or "the Project"), which comprise the statement of cash receipts and payments and the statement of designated bank account for the year ended 31 December 2020, and notes, comprising a summary of significant accounting policies and other explanatory information. In our opinion, the accompanying financial statements of the Project for the year ended 31 December 2020 are prepared, in all material respects, in accordance with the Project's accounting policies as described in Note 2. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditors' 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' International Code of Ethics for Professional Accountants (including International Independent Standards) ("IESBA Code") that are relevant to our audit of the financial statements, and we have fulfilled our other responsibilities in accordance with the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. The Emphasis of Matter - Basis of Accounting and Restriction on Distribution and Use We draw attention to Note 2 to the financial statements, which describes the basis of accounting. The financial statements are prepared to assist Project management to report to the donor. As a result, the financial statements may not be suitable for other purposes. Our report is intended solely for the Project and its donor and should not be used by or distributed to other parties. Our opinion is not modified in respect of this matter. KPMG' Responsibilities of Management for the Financial Statements Management is responsible for the preparation of these financial statements in accordance with the Project's accounting policies as described in Note 2, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors' 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 auditors' 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 ISAs 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 ISAs, 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, but not for the purpose of expressing an opinion on the effectiveness of the Project's internal control. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. We communicate with management regarding, among other matters, the planned scope and timing of the audit arrd significant audit findings, including any significant deficiencies in internal control that we iden ry g our audit. K(r1 M~~ C, Lac4 KPMG Lao Co., Ltd, Vientiane Capital, Lao PDR Date: 7"' May 2021 4 Ministry of Natural Resources and Environment Department of Planning and Finance Mekong Integrated Water Resources Management (MIWRM-AF): Additional Financing Project No. P159447/IDA, Additional Credit 61180-LA Statement of cash receipts and payments Year ended 31 December 2020 31 December 31 December 2020 2019 Note USD USD Receipts 3 5,244,709 4,244,414 Payments Goods and vehicles 4 1,631,928 905,720 Civil works 5 2,661,423 1,360,138 Consultant services 6 988,320 862,974 Training and workshops 7 159,072 217,786 Incremental Operating Costs 8 218,293 278,683 Total 5,659,035 3,625,301 Excess (deficit) of receipts and payments (434,327) 619,113 Fund balance at the beginning of the year 1,457,465 838,352 Fund balance at the end of the year 1,023,138 1,457,465 Represented by: Cash on hand and cash at bank 9 1,023,138 1,439,023 Advance - 18,442 1,023,138 1,457,465 Dr. Souksamone Pathammavong Mr. Khamphuang Khamnmounty Deputy Director General Director of Project Management Division Project Director Project manager Department of Planning and Finance Department of Planning and Finance Ministry of Natural Resources and Ministry of Natural Resources and Environment, Lao PDR Environment, Lao PDR Date: 71" May 2021 Date: 71" May 2021 5 Ministry of Natural Resources and Environment Department of Planning and Finance Mekong Integrated Water Resources Management (MIWRM-AF): Additional Financing Project No. P159447/IDA, Additional Credit 61180-LA Statement of designated bank account Year ended 31 December 2020 31 December 31 December 2020 2019 Note USD USD Receipts 3 5,224,709 4,244,414 Payments Payments made out of project's accounts (5,659,036) (3,625,301) (Increase)/decrease of cash at project's operating accounts 155,954 (61,376) (ncrease)/decrease of cash on hand 81 (54) (Increase)/decrease in advance 18,422 (13,068) (5,484,559) (3,699,799) Excess (deficit) of receipts and payments (259,850) 544,615 Fund balance at the beginning of the year 848,804 304,189 Fund balance at the end of the year 588,954 848,804 Represented by Cash at designated bank account 9 588,954 848,804 Dr. Souksamone Pathammavong Mr. Khamphuang Khammounty Deputy Director General Director of Project Management Division Project Director Project manager Department of Planning and Finance Department of Planning and Finance Ministry of Natural Resources and Ministry of Natural Resources and Environment, Lao PDR Environment, Lao PDR Date: 7th May 2021 Date: 7th May 2021 6 Ministry of Natural Resources and Environment Department of Planning and Finance Mekong Integrated Water Resources Management (MIWRM-AF): Additional Financing Project No. P159447/IDA, Additional Credit 61180-LA Notes to the financial statements Year ended 31 December 2020 1. Principal activities Mekong Integrated Water Management-Additional Financing ("the Project") was funded by the International Development Association in accordance with the Financing Agreement Grant No. H675-LA dated on 19April 2012 and Additional Credit No. 61180- LA dated on 26 July 2017 for extended to 28 February 2022. The total grant for the Project is eleven million eight hundred thousand Special Drawing Rights (SDR 11,800,000 equivalence to USD 18,000,000) and the Additional Credit in an amount equivalent to eighteen million three hundred thousand Special Drawing Rights (SDR 18,300,000 equivalence to USD 25,000,000) which will be used to assist in financing the Parts 2 and 3 (herein referred to as Components) of the Project as described below: i) Part 2: National Water Resources Management; ii) Part 3: Improved Floodplain in Aquatic Resources Management in Regionally Significant Areas. The objective of the Project is to establish key examples of IWRM practices in the Lower Mekong Basin at the regional, national and sub-national levels, thus contributing to more sustainable river basin development in the lower Mekong basin. The project will support the following three components: Component 1: Regional Water Resources Management, the objective is to provide/ensure the overall framework as well as the implementation of Mekong River Commission principles, procedures and guidelines for IWRM, and water utilization negotiations including dialogue with the upper riparian countries, within which the national and trans- boundary work will be framed. This Component's activities are specified in the Mekong River Commission's the Mekong Integrated Water Resources Management Project Document. Component 2: National Water Resources Management. The Key Objective of this component is to support institutional, policy, and human resources strengthening to implement IWRM in Lao PDR (which accounts for over 30 percent of the Basin's flow). Thus, improving water resources management in the Lower Mekong Basin as a whole. These components comprise five sub-components: (2-1) Support for Drafting a Water Resources Law through support to the Department of Water Resources within the Ministry of Natural Resources and Environment ("MONRE") (formerly known as the Water Resources and Environment Administration ("WREA") (building on policy and strategy work supported by AusAID); 7 Ministry of Natural Resources and Environment Department of Planning and Finance Mekong Integrated Water Resources Management (MIWRM-AF): Additional Financing Project No. P159447/IDA, Additional Credit 61180-LA Notes to the financial statements Year ended 31 December 2020 1. Principal activities (continued) (2-2) Support for Water Quality and Aquatic Ecosystem Health, including support to a water quality monitoring laboratory; (2-3) Support for Water Resources Modelling Centre, including review and selection of appropriate, adapted models, technical assistance and training; (2-4) Support for Hydro-met Network Upgrading, and strengthening of flood and drought warning systems, through the provision of equipment and training to the Department of Meteorology and Hydrology within MON RE; and (2-5) Component Management. Component 3: Improved Floodplain in Aquatic Resources Management in Regionally Significant Areas. The objective is to support the improved management of river basins and floodplains in the key tributaries which are critical for fish spawning and as aquatic habitat for the mainstream and Lower Mekong basin. This Component comprises three sub-components: (3-1) River Basin and Floodplain Management in Pilot Tributaries of the Lower Mekong Basin - Lao PDR. This, in turn, comprises three main activities which are described in this Project Implementation Plan (PIP) Volume 3: (3-1-1) Strengthening management in Priority River Basins of the Xebangfai and Xebanghieng Namgieb and Nam OU river basin; (3-1-2) Upgrading of existing infrastructure for enhanced environmental benefits; and (3-1-3) Subcomponent Management. (3-2) Support for Improved Management of Aquatic Resources in the Mainstream Mekong and Sekong river basin. This, in turn, comprises three main activities which are described in PIP Volume 4: (3-2-1) Support for establishing Community-managed Fisheries Management Organization in Lao PDR (Champasak, AttapeU and Sekong Provinces); (3-2-2) Support for Public Sector Fishery Management; and (3-2-3) Sub-component Administration and Management 8 Ministry of Natural Resources and Environment Department of Planning and Finance Mekong Integrated Water Resources Management (MIWRM-AF): Additional Financing Project No. P159447/IDA, Additional Credit 61180-LA Notes to the financial statements Year ended 31 December 2020 2. Summary of significant accounting policies The financial statements are prepared in accordance with the accounting policies of the Project which are a common practice for the non-profit organisation. The financial statements have, therefore, not been designed for those who are not familiar with the accounting policies of the Project. The financial statements have been prepared in accordance with the modified cash basis of accounting. Under this basis of accounting, receipts are recognised when funds are received in cash rather than when earned and payments are recognised when made rather than when incurred. This is a comprehensive basis of accounting that is designed to meet the requirements of the Project and its donor; it is not designed to produce financial statements that are compatible with International Financial Reporting Standards or other prominent generally accepted accounting principles. (a) Basis of financial statements preparation The financial statement of the Project, which is expressed in United States Dollars ("USD"). The accounting policies have been applied consistently throughout the period. (b) Fixed assets All purchases of fixed assets are recorded as payments in the statement of cash receipts and payments upon acquisition. The Project maintains a Fixed Assets Register for control purposes. (c) Cash Cash comprises cash on hand and balances with banks. (d) Foreign exchange The Project maintains its accounting records in USD in accordance with the financial agreement. All cash is held in USD. Transactions in cUrrencies other than USD during the period have been translated into USD at rates approximating those ruling at the transaction dates. All exchange differences are recorded in the statement of cash receipts and payments. (e) Accounting reporting period The financial accounting year of the Project starts on 1 January and ends on 31 Decembe. 9 Ministry of Natural Resources and Environment Department of Planning and Finance Mekong Integrated Water Resources Management (MIWRM-AF): Additional Financing Project No. P159447/IDA, Additional Credit 61180-LA Notes to the financial statements Year ended 31 December 2020 2. Summary of significant accounting policies (continued) (f) Receipts recognition Fund receipt from funding agencies and administered by IDA is recognised as a receipt when cash is credited to the Project's designated account at the Bank of Lao PDR. The IDA may make direct payments, at the Project's request, directly to the third party for eligible expenditures. (g) Payments recognition Payments incurred in the framework of the Grant Agreement are recognised on the modified cash basis of accounting. (h) Mekong Integrated Water Resources Management-Additional financing categories of payments Expenditures in the statement of cash receipts and disbursements are grouped into the following categories and defined as follows: 1) Goods and Vehicles These consist of purchasing more office computer and office equipment, furniture, field equipment, and vehicles. 2) Civil Works These consist of payment of building construction such as new DoNRE office construction and renovation, construction of modelling building centre, drilling of ground water and electric pumps, water supply system for communities and construction of water canal improvement. 3) Consultants Services Any entity or person that may provide or provides the services to the Project under the contract signed. 4) Trainings and workshops These consist of trainings, workshops, conferences, study tours, fellowships and scholarships programme but excluding (a) any cost provided through consulting services contract; and (b) salaries of officials of the Project's civil service. 5) Incren?ental Operating Costs These consist of payments to cost of goods, consulting and non-consulting services required for the day-to-day implementation of the Project, incurred by the Project, including consumable materials and supplies, communications services (postage, telephone, and internet), media and printing services, translation and interpietation services, office space rental arid utilities, leasing and/or routine repair and maintenance of vehicles, equipment, facilities, and office premises, fuel costs, bank and insurance charges required for the project, administrative support staff, and Project staff travel, lodging and per diems, but excluding salaries (including bonuses, fee, arid honoraria or equivalent payments) of officials of the Project's civil service. 1 0 Ministry of Natural Resources and Environment Department of Planning and Finance Mekong Integrated Water Resources Management (MIWRM-AF): Additional Financing Project No. P159447/IDA, Additional Credit 61180-LA Notes to the financial statements Year ended 31 December 2020 2. Summary of significant accounting policies (continued) (h) Mekong Integrated Water Resources Management-Additional Financing categories of payments (continued) 6) Sub-grant This is the expense of component 3 for improving floodplain in aquatic resources management in regionally significant areas. Also, to support the establishing community-managed fisheries management organization in Lao PDR especially Champasak, Attapeu, and Sekong province. (i) Advances Advances, for activities such as workshops, conferences, monitoring trips, are reimbursable to the project until expensed by the Implementing Agencies ("IA"). Advances are recognized as expenditure after the advance has been liquidated and the expenses reports are approved. Advances are requested by IA from the Project through formal advance request forms. 11 Ministry of Natural Resources and Environment Department of Planning and Finance Mekong Integrated Water Resources Management (MIWRM-AF): Additional Financing Project No. P159447/IDA, Additional Credit 61180-LA Notes to the financial statements Year ended 31 December 2020 3. Receipts 31 December 31 December Description Ref Date 2020 2019 USD USD Fund transfers Rh AF Replenishment 7 24 January 2019 - 129,765 8th AF Replenishment 8 24 January 2019 - 269021 9ir AF Replenishment 9 7 February 2019 - 360,949 1at AF Replenishment 10 26 February 2019 - 902,009 AF Replenishment 11 6 May 2019 - 144,144 AF Replenishment 12 22 May 2019 - 182,371 AF Replenishment 13 11 June 2019 532,346 AF Replenishment 14 27 June 2019 - 88,960 AF Replenishment 15 7 August 2019 1,132,635 AF Replenishment 16 19 August 2019 - 111,055 AF Replenishment 17 19 November 2019 108,673 AF Replenishment 18 19 November 2019 - 209,513 20 AF Replenishment 20 22 November 2019 - 72,973 2 DA Replenishment 21 3 January 2020 166,732 - n DA Replenishment 22 29 January 2020 373,743 - DA Replenishment 23 3 March 2020 502,158 - DA Replenishment 24 30 March 2020 693,815 - DA Replenishment 25 8 April 2020 149,602 - DA Replenishment 26 28 April 2020 194,824 - DA Replenishment 27 12 June 2020 351,946 - DA Replenishment 28 2 July 2020 262,753 - DA Replenishment 29 27 July 2020 123,777 - DA Replenishment 30 26 August 2020 764,296 - DA Replenishment 31 25 September 2020 683,516 - (IDA Replenishment 32 29 October 2020 224,367 ( DA Replenishment 33 26 November 2020 733,180 - 5,224,709 4,244,414 12 Ministry of Natural Resources and Environment Department of Planning and Finance Mekong Integrated Water Resources Management (MIWRM-AF): Additional Financing Project No. P159447/IDA, Additional Credit 61180-LA Notes to the financial statements Year ended 31 December 2020 4. Goods and vehicles 31 December 2020 31 December 2019 USD USD Project vehicles 48,000 39,794 Office equipment and tools 1,583,928 865,926 1,631,928 905,720 5. Civil works 31 December 2020 31 December 2019 USD USD Constructions 2,629,176 1,256,161 Office constructions 32,247 103,977 2,661,423 1,360,138 6. Consultant services 31 December 2020 31 December 2019 USD USD Staff costs - component 2 154,918 445,819 Staff costs - component 3 833,402 417,155 988,320 862,974 7. Training and workshops 31 December 2020 31 December 2019 USD USD Ti aining, workshop and seminar 159,072 217,786 159,072 217,786 13 Ministry of Natural Resources and Environment Department of Planning and Finance Mekong Integrated Water Resources Management (MIWRM-AF): Additional Financing Project No. P159447/IDA, Additional Credit 61180-LA Notes to the financial statements Year ended 31 December 2020 8. Incremental operating costs 31 December 2020 31 December 2019 USD USD Incremental operation costs - 1,430 Supporting stall costs 55,664 91,063 Meeting expenses 3,233 20,082 Mission and supervision 159,396 166,108 218,293 278,683 9. Cash on hand and cash at bank 31 December 2020 31 December 2019 USD USD Cash at designated account 588,954 848,804 Cash at bank 434,181 590,135 Cash on hand 3 84 1,023,138 1,439,023 14