THE STATE AUDIT OFFICE AUDIT REPORT RURAL CLEAN WATER AND SANITATION PROGRAM RESULT-BASED ON 08 PROVINCES OF RED RIVER DELTA IN 2018 Hanoi, June 2019 THE STATE AUDIT OFFICE SOCIALIST REPUBLIC OF VIETNAM Independence – Liberty – Happiness No: 207/KTNN-TH Re: Audit Report on Rural Clean Water and Hanoi, June 18th 2019 Sanitation Program result-based 8 provinces of Red River Delta in 2018 To: Agriculture and Rural Development Ministry Implementing the Decision no. 390/QĐ-KTNN dated March 04th 2019 by the Auditor General about the auditing the Rural Clean Water and Sanitation Program result-based 8 provinces of Red River Delta in 2018, “Expanding the rural sanitation and clean water scale result-based in 2018’ Program, the Audit team of The Audit Department No. V have audited the Rural Clean Water and Sanitation Program result-based 8 provinces of Red River Delta in 2018 from March 06th 2019 to May 04th 2019 and the audit has currently been finished. The State Audit would like to send the entity the audit report along with the official dispatch. Recipients: pp THE AUDITOR GENERAL - As mentioned-above; DEPUTY AUDITOR GENERAL - The Chairman of Finance and Budget Committee; - Minister of Finance; - The Auditor General; - Mr. Doan Xuan Tien – Deputy Auditor General; - The Audit Department No. V; - Department of Legal Affairs; - Department of Audit Policy and Quality Control; Mr. Doan Xuan Tien - Department of General Affairs; - Department of Administration (Secretariat- General unit); - Kept at: file clerk, Audit team. THE STATE AUDIT SOCIALIST REPUBLIC OF VIETNAM Independence – Liberty – Happiness Hanoi, June 18th 2019 AUDIT REPORT RURAL CLEAN WATER AND SANITATION PROGRAM RESULT-BASED ON 08 PROVINCES OF RED RIVER DELTA IN 2018 Pursuant to the Decision No. 390/QĐ-KTNN dated March 04th 2019 by the Auditor General about the auditing the Rural Clean Water and Sanitation Program result-based 8 provinces of Red River Delta in 2018, “Expanding the rural sanitation and clean water scale result-based in 2018’ Program, the Audit team of The Audit Department V have audited the Rural Clean Water and Sanitation Program result- based 8 provinces of Red River Delta in 2018 (acronymed Program) from March 06th 2019 to May 04th 2019. 1. The audit content The investment capital, investment cost for implementing the Program; manage, use and settlement the Program’s funds; determine the investment demand, appropriateness in terms of scale and scope of beneficiaries from the Program; compliance with laws, regime of management of construction investment, finance, accounting, and relevant legal policies. 2. Scope and Limitation of the audit 2.1. Scope of the audit Audit period : Fiscal year 2018 and before and after related periods Audited entities: Audit in 01 Ministry and 07 Provinces implementing the Program. Do not do the audit in Ha Nam Province (see Appendix 01/BCKT-CTMT) 2.2. Limitation of the audit Although not being qualified in terms of time and human resources, the Audit delegation did not verify the quality of construction, machinery and equipment, and did not verify with the suppliers of materials, equipment and services, did not measure the length of water supply pipelines, submerged volumes, did not audit the capital contributed by the citizens and other lawful capital sources by labor paydays or assets. Due to the finance papers prepared in the form of the Program: because the World Bank allows to calculate the output of the Program, including the external projects invested by the State budget and other donors - except for the private capital and investment, and the State Audit Department V did not verify and count the constructions, the Audit delegation only record the targets defined on the output (Receivables from the granter, the funding sources formed from fixed assets, Receivables from capital allocated from the World Bank) and formed from the Non-Program fees according to the reports of entities and the entities will be responsible for the accuracy and reliance of documents and data provided to audit team. 3. The audit base - The State Audit law, The State Budget law, The Construction law, The Bidding law, The Public Investment law, other relevant laws and legal documents. - The Standard Audit System, the audit process, the regulations on organization and operation of audit delegation of the State Audit Office. - The Grant agreement no. 5167 signed between the Government of Socialist Republic of Vietnam with the World Bank The audit report is prepared based on the audit evidence, audit papers from the Agriculture and Rural Development Ministry, the audit reports from 7 Provinces in Red River Delta, the financial reports 2018 of 7 Provinces in Red River Delta and the relevant documents. SECTION 1 PROGRAM IMPLEMENTATION OVERVIEW 1. Summary of the objectives and content of the program 1.1. Overview The Rural Clean Water and Sanitation program result-based 08 provinces in Red River Delta is a part of the National target Program on the Rural Environmental Sanitation followed the Decision No. 2283/QĐ-BNN-HTQT dated September 21st 2012 signed by the Minister of the Agriculture and Rural Development Ministry. *Target of the Program - To supply the clean and sustainable water source for 340.000 families in 08 provinces for eating and living purpose. - To improve conditions of hygienic toilets for 130.000 family in rural areas. - To supply water and sanitation condition for schools, medical centers, markets and the public constructions. - To enhance the capacity of analyzing relevant information on the water sector and sanitation condition, determine the priorities and long-term management as well as investment demand and prepare operation plans for water supply and sanitation in the provinces. - To enhance the evaluation capacity to assess the progressing program implementation, the investment and make adjustments in accordance with investment management and the Program. * The main content of the Program - Component 1: Improve the water supply condition: Invest in constructing the centralized water supply construction at commune and inter-commune levels to supply clean water for 240 communes in 8 provinces, the standard of water QCVN 02/BYT. - Component 2: Improve the sanitation condition: Including the constructing the toilets at schools and health care centers which meet the national standards. For the sanitation in each family, the Program will support to build the sample family toilet for the poor families. - Component 3: Enhance the capacity, communication, monitoring, assessing and managing the Program, including training and building capacity for water supplying sector and sanitation both at high level and 8 provinces levels, monitoring and evaluation and management capacity of water quality, planning and increasing the sustainability of water supply facilities. Information, education and communication activities are designed to promote sanitation behaviors, iincrease the sanitation demand and change the sanitation results in communal and provincial scope.  The capital of the Program The total capital of the Program : USD 230,500,000 Details: - Loan capital from WB : USD 200,000,000 - Counterpart fund from the State Budget : USD 10,500,000 - Capital contribution from the community: USD 20,000,000 According to the Agreement and financial mechanism of the Program, each province will arrange the counterpart fund from other legal funds following to its specific condition. Apart from The Component 1, WB sponsors 90% of investment cost, 60% of which is government borrowing, and 30% of which is local lending.  The total loan capital from WB (the capital comes to capital account) for Provinces audited in scope of the Program in 2018 is 624.517 million dong.1  Scope: see Appendix 01/BCKT-CTMT.  Time: From 2013 to July 2019. 1 Agriculture and Rural Development Ministry (The General Department of Irrigation Office): 2,976 million dong, National Environmental Protection and Sanitation Center: 1,829 million dong, Hanoi: 60,845 million dong, Bac Ninh: 122,369 million dong, Phu Tho: 38,820 million dong, Hung Yen: 146,912 million dong, Thanh Hoa: 132,571 million dong, Quang Ninh: 58,620 million dong, Vinh Phuc: 59,972 million dong. SECTION 2 AUDIT FINDINGS A. FINDINGS OF AUDITING FINANCIAL REPORTS AND INVESTMENT COSTS OF THE PROGRAM I. FUNDING SITUATION AND BUDGET SETTLEMENT IN 2018 Unit: dong No. Item Reported figure Audited figure Difference A B 1 2 3=2-1 Budget brought forward 1 225,383,767,577 225,383,767,577 0 from last year Estimates allocated for 2 the year 906,232,728,479 906,232,728,479 0 Capital to main account/ 3 adjunct account 623,087,580,849 623,087,580,849 0 Total budget availaible 4 for use in the year 848,471,348,426 848,471,348,426 0 Expenditures proposed 5 to settlement in the year 674,446,471,666 674,437,610,699 -8,860,967 6 Decrease in the year 5,248,591,120 17,735,282,498 12,486,691,378 Budget carried forward 7 to the next year 168,776,285,640 156,298,455,229 -12,477,830,411 Reason of the difference: See Appendix 07/BCKT-CTMT II. FINANCIAL REPORT IN 2018 (for detailed index and reason of the difference, see Appendix 02, 03, 04, 05/ BCKT – CTMT) III. INVESTMENT EXPENDITURE IN 2018 Unit: dong No. Construction Reported number Audited value Audited number Difference A B 1 2 3 4=3-2 Audit the approved 30,024,814,287 25,929,754,379 25,929,754,379 0 1 settlement value Audit the A-B 2 settlement value 439,532,010,856 410,217,411,742 404,073,920,310 -6,143,491,433 Total 469,556,825,143 436,147,166,121 430,003,674,689 -6,143,491,433  The reason of the difference: Incorrect volume: decrease 3,078,205,110 dong - Incorrect Price: decrease 100,609,824 dong - Differences, ineligible for payment expenditure: - 2,964,676,498 dong See Appendix 06/BCKT-CTMT V. THE TRUTH AND FAIRNESS OF THE PROGRAM FINANCIAL STATEMENT Under audit scope and limitation, after adjusting figures of auditing results, financial report of “The Rural Clean Water and Sanitation Program result-based 08 provinces in Red River Delta in 2018” prepared by the entities, truthfully and fairly presents the capital status and implementation investment cost (Audited Implementation investment cost is 430,003 million dong, -6,143.5 million dong in difference. Audited expenditure in this year is 674,437 million dong, -8.8 million dong in difference)