CARE NEPAL AUDITED FINANCIAL STATEMENTS FORTHEPERIOD 17JULY 2018TO 16 JULY 2019 PKF T R Upadhya & Co. Charteted Accountants Issued Date: 3 October 2019 PKF T. R. Upadhya & Co. PK INDEPENDENT AUDITORS' REPORT Ms Lora Wuennenberg Country Director CARE Nepal I alitpur, Nepal Opinion We have udited the accompanying financial statomonto of CARE Nepal which comprise the batance sheet as at 16 July 2019. Income & expenditure statement and cash flow statement for the period then ended, and a summary of significant accounting policies and other explanatory notes. fn our opinion. ile acoMpanying financial statements present fairly. in all material respects, the financial position of the CARE Nepal as at 16 July 2019, and its financial performance and its cash flows for the year then ended in accordance with the basis of accounting described in Note 2 of the hnancial statements. Basis for Opinion We cunduced our audit in accordance with Nepal Standards on Auditing (NSAs). 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 independeni of the organisation in accordance with the ICAN's Handbook of Code of Ethics for Professional Accountants together with the ethical requirements that are relevant to our audit of financial statements in Nepal, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAN's Handbook of Code of Ethics for Professional Accountants. We believe that thea udit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Emphasis of matter - Basis of Accounting We draw attention to Note 2 to the financial statements, which describes the basis of accounting. The financial statement is prepared on the modified cash basis of accounting, which is a comprehensive basis of accounting other than generally accepted accounting principles. The management determines it an acceptable basis for preparation of financial statements in the circumstances. Our opinion is not modified in respect of this matter Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with the basis of accounting described in Note 2 of the financial statements, 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- In preparing the financial statemenIs, management is responsible for assessing the organisation's ability to continue as a going concern. disclosing, as applicable, matters related to going concem and using the going concern basis of accounting unless management either intends to liquidate the organisation or to cease operations, or has no realistic alternative but to do so- Those charged with governance are responsible for overseeing the organisation's financial reporting process 124, Lal Colony Marg, Lal Durbar, Kathmandu, Nepal Tel:+ 977 01 4410927. +977 01 4420026. Fax: +977 014413307 pkf.trunco.com.np PKr r. R UpdhyL, e C ia c m o,-b,r of th" PXF ,nine-rhna1 Lminted network of lI6ally indepenrdenifms ani drei not pccept any rEspornsibility cr iab lidy for the ticitons or Intilons of Afy olter indlviduai member or firrns Auditor's Responsibilities for the Audit of the Financial Statements Our objectives ale to obtain reasonable assurance about whether the financial statements as a whole are free from material mis statements, whether due to fraud or error, and to issue an auditor's report that includes cur opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with NSAs 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 NSAs. we exercise orofessional judgment and maintain professional scepticism throughout the audit. We also M Identity and assess the risks of material misstatement of the financial statements, whether due in 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 delecting 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 X Obtain an understanding of internal control relevant to the audit in order to design audil procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the organisation's internal control. I Evaluate the oppropriotonoso of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. X Conclude on the appropriateness of management's use of the going concem basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the organisation's ability to continue as a going concern. If we conclude that a material uncertainty exists, we arc required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are Inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the organisation to cease to continue as a going concem. We communicate with those charged with governance 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, Shashi Satyal PKF TR Upadhya & Co. Chartered Accountants Kathmandu. Nepal Date: 3 October 2019 CARE Nepa! BALANCE SHEE7 As дп 31 Asf�a$ 207Б Cvrres aridiTi W ifi Эv! г019 9.![. 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Ri"1jonWAdvCrUBlnQ 2.11,508,30 2,t".39 848,590,21 a.215 W i ramm ý GGfiýracior ServIces 6ý33,ZZ7ý32 5.011,74 44.31 G," 5 2!; 42Z.4iDA.W Traini,ný 31.723,405 95 284,709-29 - Total 1645413,Q54." 1.463.655M 138.191.575,8Z 1.3z7.7y3159 - 5chQdulc 19 Iпtг.п Gотрапу Gra:rts апд 5ирроК Cu�rent Yëer ?rnvlоди Уеаг 3цРR U5A ЛlPR цS➢ 1СЯ Ехрепге 38,&р6,65$.92 3А9,д85.33 82,д52,378.й3 6а3,гS7,4д Pnor yearrs €CR ПdJuslmeni {5.341,598.7д] (4[i,372.r]7� 5,3д8,525.7{г 52,32А.95 Totai 33.AS5.4б6.fY8 З6S.113.гб Б7,9д7,9q4.13 бБ5.54Т.й3 SсНвдиlц 77 Professioпal ScyvEeas Current Упаг Preriuua Ycar 1VPR U3d Nйfi Li$р /ЧidiVkceai�ntrпg РееS i.67S 8F 1 49 }R,538 0[1 7,58$,Б32 ЭО i5.б59.А6 Consu'tRn7Fevs q6,82B,47886 ЗG5,162.З8 54,535,89р.3д 527,395.83 1Т Sегугспs Fec 9,27fУ,б35.Тб 28,85д.3д 3,938,387,9Э 37,б7i.3О Ldpa35crvгces - - 58,5U9.ilП Бiп&G ❑ther Pгоlыs,iUстai Fees 3,14G,6i3.33 27 88Q.U3 2,д$Т.201.93_ 23.450,78 Tota! 49.Q38,4T9,85_ $3896д.В3 п Б$,5д$,912.3i 6Ud,257'.83 ScheduIe ^18 Travol ппд Transporia[1on Сиггыпt Уеаг Rrnv1ous Year NРд i18C ыРR USp Кергеsо»fа7,опlkпEe�tatnni[:пг - - 23,3б4.87 228.95 тгдпърогtаtюп Раго 27 330,В30 47 2дА,е25 r7 35,733,4Aa.FЭii ЭR5,881.00 irUnsp.rtalion Faro lnfяrnai�oпa� 3 777,334.31 29,555 44 6,682,д90 Б2 G6,325 8U Vehicl� pperauan & Л+Эаi�[ппдпсс э1 848,8а7 А8 1[15,825.77 8,75А,За5 U2 84.217,9i • Vв1юеlePurel�яsr5lRnnlаЕ 3851,788.7� Зд,822S8 7,084,1i82T б9,716.16 Tvta1 йб,1SВ,768.д�i 41д,232,2G 5В,д73,75$,58 855,47i.B4 5chadula i4 FinanclnцlMESSeliдneous Сипеп! Year Ptwrri4us Year HHR l3S❑ NPR l18А бadOaktEx}x�nse {336,Я9173} {Э.а32.14} (29,775.гi2] �19й i2j 13апk�'СГрдгlСдпl Fuca 85,595 15 761 1а ц4.232.55 б25.а3 CcArecral�oп 5,U35,d69.63 h5.657 48 14,374,5{18.ЗЗ 7Е7l,уl17 &t kViSCe!lanews O7hor Exд©пsвs а.7(18,G15 77 �З,SОА б0 28Р,2#5 29 г,846.5I Л.дгтсоЭlнпысцв Taxo9lF��es Б99,дд6 2б Б.2В4 fl8 2,057,9б9.3А 20,2д1 22 Cther Fi»лпсгпр Сnкlа 73,ОВ9.31 Б5� EW 16-"•дЬ.7Э] 355.9а Tata1 #р,270,93д.38 92 934.27 27,72i,C36.37 ___ ____?71,672.б8 5сfгедиЕв Ra Оесирапсу Related Ехрдпs� Gurroпt Уваг Ртмгiоца Уааг NPR 1130 t1hF2 цS0 RидкfiгкЭ RepairsггJlainVlrtиpго�emanl8 356.102.7Ф 3,57V 3t3 197,761.ОВ 1,005.83 Гnттип:сагэ�пsfхрсnиа 2,l91.259 S2 2225876 2.б99,245.1С �5,2lЭ4.97 Fвciлt�пs RentallLdusehokf Итр�дv©merrt 9.450.255 2& 8д.а55 д4 10.156.791.3г 98,542 4д lггиигапсс Cxpcnaa 3,535.570 7& Э2 П40 $А R.173,877.&В 41,434.7а lli�hlгдs Ехрепsы 1,-03Т.387.59 12,85б 6В 1.885,4]91ifi 1&,35Z.3d Тп1а! t7,37$.556.д7 1Б5,293.й2 1В.$25.274.87 783,48А.48 �F.7ff1l.� . �. �`. . ч� 1;, AfI Ч 1= . � е� и У � S" rtl.l[C9v�;. 5е1тди3а х1 Egui�ment Purchasпti, ,„ Currunt Уеаг pre�iaus Увег ииR U5❑ КРt2 �5❑ СдпппигосаtiопsЕуиiргпепt 727,б1720 Б,5�1269 280,79г.16 2,7i8.S3 СатриtегНагдцгnгд 2,йБ2.б9543 22,08�4-7б 9,541,4р490 91,8G6-Б8 Camputer $ottware • • 9А5,4Б5-20 7,433.5В MachЭпerleS1U1f1rцEqRt 18,151583G3 10.5.8i5-БЗ 7.,GeЭ,S7957 255977п qffiG& Eqpt 287,8х6 47 2,Б44 б7 �1д,350 17 2,089.94 ofFrce FurnпurelF�xture 8Z4,497,25 7,34i.95 Z45,028.70 2,39$.28 Fцta1 А& 4i+F.9i3.76 T84,3л8.0iI 73,ПВБ,784.]11 Т2&,bf18.83 5eheduse2x Rn�]fsr-d лvrhpn п»1nгцlпхl;пк Gurreirt Увлr PrevFoua Унаr i+iPR L15D ЛFPFi tJSA Fnrcиyп ыхсh:�пgе a�justmыпt 4а,7'ди.ва4 дз�. .. i7 a,52y 79) 4.965 537.97 799 52 Т[�tal 14.7А8�Б+iА.гi3 10.526.79 _____ _______4,965.357.97 i798.82] ц 5� . r -� т�. . ��.. . , � fl �а �_� у i � cauv^�. , CARE Nepal Schedule 23: Significant accounting policies & Other Explanatory Notes For the Period: 17 July 2013 to 16 July 2019 1. Background CARE has been working in Nepal since 1978. Its initial focus was on addressing the basic needs of the poor and vulnerab e communities through infrastructure development, agriculture extension activities and natural resource management. This focus changed in the 1990s with the introduction of a more diversified portfolio and a community-based 'human infrastructure development' approach. Since 2000, CARE Nepal has been working in partnership with local NGOs, networks, federations and community groups to address the underlying causes of poverty, conflict and vulnerability through promotion of gender and social inclusion, a rights- based approach and social-mobilization. By 2020 CARE will support 3.95 million people from the most vulnerable and excluded communities in Nepal to overcome poverty and social injustice. CARE Nepal facilitates the empowerment of civil society organizations (CSOS) including Community Based Organizations (CBOs), partner with local NGOs and collaborates with government counterparts and donor agencies. CARE pursurms a partriership Tnudalily arid multi-sector programming, is guided by gender equity and diversity principles, and strives to be a learning organization. 2. Basis of Accounting The financial statements are prepared in accordance with the historical cost convention on modified cash basis. Modification to cash basis of accounting results from management's decision to record employee retirement benefits and year end expenses on accrual basis. Management has determined that the modified cash basis of accounting as described above is an acceptable basis for preparation of the financial statements in the circumstances, 3. Scope of Financial Statements The financial statement consists of the balance sheet as of 16 July 2019, income and expenditure statement and Gash flow statement for the period of 17 July 2018 to 16 July 2019 and significant accounting policies and notes to the accounts which is governed by general agreement with Social Welfare Council. 4. Currency Translation Funds are remitted from CARE LISA and other donors directly to the US Dollar, EURO or Pound Sterling bank accounts, as the case may be, of CARE Nepal, Funds are transferred from those accounts to local Currency account of CARE Nepal from where funds are remitted to the respective project offices by wire transfer directly to the designated bank account. The accounts are maintained in the PeopleSoft in both transaction currency (which may be USD, NPR, GBP, EURO etc.) and base currency, USD. The exchange rate for the conversion is taken from www.oanda.com which has direct link with the PeopleSoft. 5. Currency Revaluation CARE works with muitiple donors and involves different currencies for transaction, Due to effect of timing difference, exchange gain/loss is automatically accounted for by the system in each month as per exchange rate published by www.oanda.com. CARE Nepal Schedule 23: Significant accounting policies & Other Explanatory Notes For the Period: 17 July 2018 to 16 July 2019 All the balance sheet items (except for net assets) are revalued with the exchange rate of 16 July 2019 (generated from www.oanda.comi and resulting revaluation gain and loss has been manually adjusted in the financial statements under account code 471111. 6. Value Added Tax (VAT) Receivables The VAT amount paid on expenses incurred for USAID funded project is refundable from Government of Nepal on submission of VAT refund claims. These are recorded as VAT receivables from Inland Revenue Department in the financial statements. 7. Revenue Recognition In current fiscal year revenue is recognized when expense for the grant is incurred. Till previous year, revenue for unrestricted grants were recognized at the time of receipt of grants and for restricted grants it was recognized when expenses were incurred for the grant. The unspent grant is recognized as grants and contracts payable as these balances are refundable to CARE USA or respective donors, if, not spent within the stipulated timeframe. in current year unrestricted grants of last year has been reclassified as restricted, as the unspent fund of unrestricted grant is liability of CARE Nepal towards CARE USA. 8. Net Assets Net Assets is represented by the unspent amount of earlier periods which is liability towards CARE USA. 9. Grants to Partners and Sub-Grant Expenses Grant and sub-grant to the partners are treated as advance at the time of disbursement of fund and expenditure accounted once settlement report is received. 10. Property, Plant and Equipment & Depreciation CARE Nepal has adopted the policy of capitalizing property and equipment if the cost of the individual item exceeds USD 5,000 (USD 25,000 till previous year) and if the property/equipment has a useful life of more than one year and the title vests on CARE Nepal. Depreciation is calculated and recorded in PeopleSoft on monthly basis. Depreciation is calculated as per the straight-line method considering the useful life of the assets estimated as 3 years 11. Inventory/Consumable Items inventories procured during the year have been recognized as expenditure at the time of purchase. CARE Nepal Schedule 23: Significant accounting policies & Other Explanatory Notes For the Period: 17 July 2018 to 16 July 2019 12. Accrued Employee Benefits CARE Nepal has the policy to accrue the employee benefits as per the HR Manual. Currently, it has the following benefits which are accrued on monthly basis. a) Gratuity: Equivalent to 8.33% of basic salary and it will be paid after separation from CARE Nepal. b) Festival Bonus: This is one -month basic salary accrued on pro-rata basis and the festival bonus is generally paid once every year during September or any other month as per staffs request based on their religious practice. c) Annual Leave: Leave is accrued on the accumulated leave balance maximum up to 90 days based on the monthly basic salary. It is paid after separation from CARE Nepal. d) Sick Leave: Based on the requirement of new labor law introduced by Nepal government, CARE Nepal also amends its HR manual and introduced cashable sick leave of I day for each month effective from 1 January 2018 with maximum accumulation up to 30 days based on the monthly basic salary. Accumulated leave is en-cashable on separation from CARE Nepal. e) Special accruals: 2% of employee basic salary is accrued on monthly basis to cover disastrous or calamitous cases of employee and this is retained by CARE USA. CARE Nepal Sigrificant accounting policies & Other Explanatory Notes For the Period: 17 July 2018 to 16 July 2019 Other Explanatory Notes 1. Period of Financial Statement and Cut-off The financial statements have been prepared considering the Nepal Financial Year from 17 July 2018 to 16 July 2019 to coincide with the accounting period prescribed by the income Tax Act, 2058. CARE Nepal's accounting system follows period 1 July to 30 June of succeeding year for financial year cut-off. The income, expenses, assets and liabilities in financial statement has reported in following manner: a) All assets and liabilities except those relating to payroll costs of CARE Nepal and partner NGOS costs are stated as of 16 July 2019. b) Payroll costs and Partner NGO'S expenses are considered from 1 July 2018 to 30 June 2019. c) Regular and routine transactions are accrued till 16 July 2019, 2. Adjustment relating to Currency Translation CARE Nepal is using the accounting ERP called PeopleSoft where transaction are recorded in transaction currency (i.e. NPR) as well as base currency which is USD. For the purpose of presentation of financial statement in NPR, manual adjustments of revaluation gain/loss resulting from currency translation have been made outside books of account to reflect the correct figure of the NPR and the proper reconciliation of financial statements with the books of account is maintained. 3. Cash and Cash Equivalents Cash and cash equivalent consists of cash in transit, cash held at bank, petty cash maintained in all offices of CARE Nepal including field offices. Below are the detail of cash and cash equivalent as on 16 July 2019: Amount in NPR Amount in USD Description Current Previous Current Previous Year Year Year Year Cash in Hand 18,580,544 95 92,222,654,29 166949.03 835,292.43 Cash at Bank 694,002.48 920,52745 6,242 47 8,337.54 Cash in transit 32,138,738.47 (629,725.53) 289,084.14 (5,703-65) Total 51,393,286,90 92,513,466,21 462,276.54 837,926.32 Cash in transit represents the balance received and recorded in the books but yet to be reflected into bank balance. These amounts have been reflected inthe bank in the subsequent months. 4. Grants and Contract Receivable Grant receivables represents grant to be received from the donors. As grants have been received in advance there Is no grant receivable as on 16 July 2019. CARE Nepal Significant accounting policies & Other Explanatory Notes For the Period: 17 July 2018 to 16 July 2019 5. Grants and Contract Payable Funds received from donors are initially recorded as liability under this account head until expense is incurred. Following is the status of Grants and Contract Payable as of 16 July 2019: Amount in NPR Amount in USD Description Current Previous Current Previous Year Year Year Year Grants / Contracts Payable 119,015,795.19 34,243,331.35 1,059,804.12 310,153.86 6. Indirect Cost Recovery (ICR) ICR is the cost recorded/recovered as per the rate agreed between Donor (U SAID) and CARE USA. During FY 2019, NPR 33,465,060.08 (USD 303,113.26) has been recorded as iCR expense. 7. Accrued Employee Benefits CARE Nepal accrues the following benefits as stated in the HR manual on a monthly basis. Status of accruals as of 16 July 2019 are shown below: Amount in NPR Amount in USD Accruals Current Previous Current Previous Year Year Year Year Gratuity 244100 70,810,712,63 71,741,620.21 636,933.96 649,789.02 Leave 241200 45,760,078.75 34,942,014.24 411,606.48 316,482.08 Medical insurance 17,316,944 33 21,281,263.65 155,763.86 192.751.87 241106 Total 133,887,73531 127,964,898.10 1,204,304.30 1,159,022.97 Note: As required by the new labor law, CARE Nepal is yet to deposit the accumulated accrual against the grurity into the designated account prescribed by the law. 8. Revaluation Gains and Loss CARE USA absorbs all exchange gain/loss arising out of currency revaluation for the period of 1 July 2018 to 30 June 2019. The gain/toss appearing in the financial statement is because of the difference in cutoff period of financial statements i.e. 17 July 2018 to 16 July 2019. 4VADN CARE Nepal Significant accounting policies & Other Explanatory Notes For the Period: 17 July 2018 to 16 July 2019 9. Property Plant and Equipment Property, Plant and Equipment includes Item with the individual value of above USD 5,000 (USD 25,000 till previous year). The movement of fixed assets during this period is shown below: Amount in USD Particulars Current Previous Year Year Brought forward fixed assets net of depreciation 24,157.72 153,129.73 Net Additions Depreciation (15,259.29) (128,972.01) Closing Balance 8,898.43 24,157.72 10. Exchange Fluctuation Adjustment For the purpose of preparation of financial statement, all balances generated in base currency by the system are converted into NPR which has resulted in gain of NPR 4,748,644.43. Details are presented in the table below: Amount in Particulars NPR 16 days transaction Impact of Efflux (1,749,069,40) Difference out of translation of USD balance in NPR (2,999,575.03) Total (4,748,644.43) 11. Contingent Liabilities CARE Nepal does not have any contingent liabilities as on 16 July 2019, 12. Comparative Figures Figures of the financial statements are regrouped and rearranged where necessary to make them comparable with previous year balances. 13. Presented Currency All the figures mentioned in the financial statement and schedules along with significant accounting policies and notes to the accounts are presented in both US Dollars and Nepalese Rupees.