6096 CARE Nepal 4/288 - SAMATA Bhawan Dhobighat P.O. Box 1661, Latitpur, Nepal Tel: 977-1-5522800 Fax: 977-1-5521202 Date: 17' Dec 2018 Email: carenepal@care.org Website: www.carenepatorg To: The World Bank, Yak & Yeti, Durbar Marga, Kathmandu, Nepal Subject: Submission of Audited Financial Statements Dear Madam/Sir, In reference to the "Letter Agreement (Grant No. TFOA2450)"signed between CARE-Nepal & World Bank, clause# 2.07 C under Financial Management, we are pleased to submit the Audited Financial Statements for the period of 1 July 2017 to 16 July 2018 for your reference and documentation. Please let us know if you have any. Thank you. With Regards Birbhadra Lamichhane Finance Controller REPORT CONFIDENTIAL CARE NEPAL AUDITED FINANCIAL STATEMENTS FOR PERIOD 1 JULY 2017 TO 16 JULY 2018 Performed by: PKF TR Upadhya & Co. Chartered Accountants Issued Date: 12 October 2018 PKF T. R. Upadhya & Co. INDEPENDENT AUDITORS' REPORT Ms Lora Wuennenberg Country Director CARE Nepal Dhobighat, Lalitpur Nepal Report on the Financial Statements We have audited the accompanying financial statements of CARE Nepal which comprise the balance sheet as at 32 Ashad 2075 (16 July 2018), the income and expenditure account, and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes. These financial statements have been prepared by the management using the modified cash basis of accounting described in Note 2. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with the modified cash basis of accounting as described In Note 2 which describes the basis for the preparation of the financial statements in the circumstances, 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' Responsibility Our responsibility is to express an opinion on these financial statements based on our audit, We conducted our audit in accordance with Nepal Standards on Auditing. Those standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free of material misstatement. Our audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity's preparation and fair presentation of the financial 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 entity's internal control, An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements- We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of CARE Nepal as at 16 July 2018 and its financial performance and its cash flows for the period then ended in accordance with modified cash basis of accounting stated in the accompanying Note 2. Basis of Accounting Without modifying our opinion, we draw attention to Note 2 of 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. Shashi Satyal Partner o. T R Upadhya & Co. Chartered Accountants Kathmandu, Nepal 12 October 2018 124, Lai Colony Marg, Lal Durbar, Kathmandu, Nepal Tel:+ 977 01 4410927, +977 01 4420026, Fax: +977 014413307 pkf-trunco.com.np PKF TR Upadhya & Co. is a member of the PKF international Limited network of legally independent firms and does not accept any responshility or liaWlly for the acions or inactions of any other individual member or firms. CARE Nepal BALANCE SHEET As on 32 Ashad 2075 (Corresponding to 16 July 2018) Particutars Sch. No. As on 16 July 2018 As on 30 June 2017 NPR USD NPR USD Assets Cash and Bank 1 92.513.456.21 837.926.82 58.323.B59.01 557.161.83 Grans/Contracts Receivable 2 - - 208,748,286.71 1.994,150.94 Advances and Rece[vables 3 45,919,394;09 415.908.06 42,93341.04 410,139.01 Prepaynents Deposits 4 10,533,328.37 95.404.05 250,000.59 2,388.23 Fxed Assets 5 2.657.194.92 24.157.72 16,029.663,62 153,129.73 ninr-Company Receivable 6 231.392,132,89 2,095.799,72 191.039,634.24 1,824,982.01 Total Assts (A) 383,025.50648 3,489,196.37 517,324,912.22 4,941,961.75 LiabilltiLes Payable 7 27.314.080.58 247.393.21 80.659,914.74 770,535.89 Advancr Received frorn DonorsICMVPs 8 34.243.330.47 310.153.86 73,159,379.78 698,684.04 Taxes and o~tr deductorn 9 3.432.525.77 31.089,59 4.955.454.87 47 .367.61 Accruals and provisions 10 146,289,699.14 1,324,997.12 125,337,834.14 1.197.337.41 Total Liabillties (B) 211,279,636.06 1,913,533.78 284,115,383.53 2,714,124.95 Net Assets ( C) 171,745,870.43 1.55551.59 233,209,528.69 2,227,826.79 Total of Net asscts and Liabillties {B+C) 383,025,506,48 3,469.19,37 617,324,912.22 4,941,951.75 Notas to the Accounts 24 Sahedules I to 10 and 24 torn an integral part I blis Balance Sheet Shivarir Lora Wuennenbe;9 Sbashi Satyal Assist I Country Diector-Pmgram Support and Finanee Country Direcor Partner CARE-Nepal CARE-Nepal TR Upedibya& &t Chrtered Accountants Date: 2 g Plic: CARE Nepal Income and Expenditure Account for the period ended on 32 Ashad 2076 (Corresponding to period ended on 16 July 2018) PartIculars Sch. no. Current Year Previous Year NPR USD NPR US0 Bevenue Grants&Contracts DireciRevenue 11 1,225.305,516.08 11.831,663.70 1.378,B98,759.82 13.217.614,72 Intra-Company Grants and Support 12 174.516.692.81 1.682,67964 118,542,091.43 1,140508.57 Cash Donation/Otber sources 13 3.296,317,23 31,96&.35 1,467,535-16 14A52,23 Total 1,403,218,526.09 13,546,198.0 1,499,008,386,22 14,372,575.52 Les: Expense Sub Grant Expenses 14 649,891.919.78 6.269,872,22 641.927,527.84 6.130,571.15 Personal expenses 15 438,643,627.23 4.244,23410 406,814,447.46 3,891.550.93 Malerial0services and consumables 16 138.191678.82 1.327,773,89 222,1B4,438J83 2.116.303.70 Mtra Company Grants and support 17 67.801,904.13 855,542.43 45,816212.24 440.027.08 Professional Services 18 82.543,812.31 604,267.03 86.232,035.64 820.444,19 Travel and Trnsporlatior 19 61.770.072.81 597,437.19 76.409.522.17 724,08536 FinancnglMscellaneous 20 21 721,636.37 211,072.65 23108.617.89 221,31641 Occupancy related expenses 21 18,825.274.87 183.480.48 22.530.218,02 212.841,27 Equipment Purchased 22 13,086.380.70 125.592.82 24,418,547,37 230.455,23 Realized exchange galnWfosses 23 4L5a5.337.97 (790.92) (6.985.830.55) (000) Total 1,477,441,644.99 14,218,463.49 1,842.455,931.70 14,757,625.31 T Surplust(Deficit) (74,223,118.89) (672,2"480l (43,447,645.4S) (415.049.79) Shiv D1 hikal Lora Wuennenberg \Shashi Salyal s an ounby Direclor-PS& Finance Countrvy Director Padner CARE-Nepal CARE-Nepal TR 1padNyr Co Chartered Accountants Palae:/.,O( JO CARE Nepal Cash Flow Statement for the period ended on 32 Ashad 2075 (Corresponding to period ended on 16 July 2018 2018 (NPR) 2018 (USD) zoll (USD) CASH FLOWS FROM OPERATING ACTIVITIES Exccss/deficency of revenue over expenses (74.223.118.89) (672264.80) (415.049,79) Adjusimenls for Depreciation 13.352.468,70 128.972.01 132 231.93 Adjustm enl in the openIng balance of nel assets 12.759.460.64 Excess (deficiency) of revenue over expenses before changes In operating assets & liabilities (48,101.189.5S) (543.292.79) (282.517.88) Changes in operating a sets and liabllitles Increase/Decrease in Grant/Confracf Recevable 208,748,286.71 1,994,750.94 (1,153.736,95) jncrease/)ecrease in int Company Receivable (40,352,498.65) (270.81771) 2,283953.39 Increaseiecrease In Other Receivabie (2,985,926-05) (5.769,05) 314.785.68 IncreaseDecrease In Accounts Payable (53,345,534,06) (523,142.68) 349.56938 Increase/Decrease In program advance from donors (38,916.049t32) (38730_18 (2,184,864S09) increaseMDecrease in Taxes and other deductions (1.525,929.09) (16,278.02) 13,20768 ircreaseADecrease fir Accruels & Provislns 20,952,064.99 127.659,71 260.914Z7 Cash generated from (used for) operations 9-2574,t 14.53 917,073.01 (116,170841 Net cash provided by (used In) operating activities 44,472,924,98 373,780.22 (0,988.70) CASH FLOW FROM INVESTING ACTIVITIES Purchase of office equipment and addilional office improvement Return of (Additional) Deposits (10.283,327.70) (93,0182) 3314?444 Net cash provIded by (used in) Investing activities (10,283.327.78) (93,0582) 3,14744 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 34,189,597.20 280,7Ei4A0 (395,841.26) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 58,323.859.01 557,161.83 953,003.11 CASH AND CASH EQUIVALENTS AT END OF YEAR 92,513,456.21 837292682 557,161.3 Sivanti I Adhi ,Lora Wuennenberg Shashi Satya" Assistant untry Director-Program Support and Finance County Director Partner '- CARE-Nepal CARE-Nepal TR Upadhya & Co. Date: ZOChartered Accouantd Place: Kc-t4eoncdu Schedule I Cash and Bank As on 16.7.2018 As on 30.6.2017 NPR USD NPR USD Bank 92,222,654,29 835,29293 50,972,146.54 486,931.68 Cash 920,527.45 8,337.54 970,001.01 9.266.32 Cash in transit (629,725.53) (5,703,64) .6,31,711.46 60,96s 8 Total 92,513,456.21 837,926.82 58323,859.01 557,161.83 Schedule 2 Grants/Contract Receivable As on 16.7.2018 As on 30.6.2017 NPR USD NPR USo Grants/Contract Receivable 208.748,28671 1,994,15094 Total - 208,748,286.71 1,994,150.94 Schedule 3 Advances and Receivables As on 16.7.2018 As on 30.6.2017 NPR USD NPR USD Inter-Company Rec/Pay with Cl members 537,910.67 4,872.10 6,621,470.76 63,254,23 Other Receivables/Advances 3,662.870.17 33,175.90 1,631,389.89 15,584:50 Project/program Advance 252.003.05 2,282.48 1,139,549.57 10,88600 Subgrantee Advances 28.962,981.15 262,327.88 22,08844541 211,008 65 Travel Advance 191,009.50 1.730,04 368,921.58 3,524.27 VAT Receivable 12,312,613.55 111.519.66 11,083,69083 105881.36 Total 46,919,394.09 415,908.06 42,933,46804 441139.0 Schedule 4 Prepayments/Deposits As on 16.7.2018 As on 30.6.2017 NPR USO NPR USD Deposits 249,824.71 2,262.75 250,000-59 2,388.23 Prepaid Expenses 10,283.50367 93.141.30 - Total 110,533,32037 95,404.05 250,000.59 2,388.23 Schedule 5 Fixed Assets As on 16.7.2018 As on 30.6.2017 NPR USD NPR USO Accum DepniAmortization (76,337,656.18) (691,416.93) (58,876,893.95) (562,444.92) Properly, Plant & Eqpt 79,004,851.10 715,574.65 74,906,557.58 71557465 Total 2,667,194.92 24,157.72 16,029,663.62 153,129.73 Schedule 6 Intra-Company Receivable As on 16.7.2018 As on 30.6.2017 NPR USD NPR USD Intra Entity Receivable/Payabl 150,312,028.61 1.361,428.77 103,503,205.07 988,755,49 Intra Entity XfMuc Repatriation 81,080,10428 734,370.95 87,5363429217 836,226.52 Total 231,392,132.89 2,095,799.72 191,039,634.24 1,824,982.01 Schedule 7 Payable As on 16.7.2018 As on 30.6.2017 NPR USD NPR USD Accounts Payables 27.314,080.68 247.39321 80,659,914.74 770.535.89 Total 27,314,080.65 247,393.21 80.659,914.74 770,835.89 Schedule 8 Grants and Contract Payable As on 16.7.2018 As on 30.6.2017 NPR USD NPR USD Grants/Contracts Receivable 41,565,254.02 376,471-09 73,159,379.78 698,884.04 Interunit G&C Receivable (1.934,539.18) (17,521.80) - Unbilled Revenue (5,387,384.37) (48,795.43) - - Total 34,243,330.47 310,153.88 73,169,379.78 698,884.04 Schedule 9 Taxes and other deductions As on 16.7.2018 As on 30.62017 NPR USO NPR USD National Income tax payable 3.432.525.77 31,089.59 4,379,220.12 41,83424 Other tax payable (0.00) ((000) 579,23474 5,633.37 Total 3,432,52577 31,08959 4,958,454.87 47,357.61 Schedule 10 Accruals and Provisions As on 16.7.2018 As on 30.6.2017 NPR USD NPR USO Accrued Benefits 127.964.898.10 1,159.022.97 106.383.871 14 1,016.274.20 Accrued expenses 2,298,557.44 20,818.84 3.419,888.23 32.66971 Employees benefits payable 16,028,243.60 145,155.31 15,533.874.77 148,393,50 Total 146,289,699.14 1,324,997.12 125,337,634,14 1,197,337.41 p,UP Schedule 11 Grants and Contract Direct Revenue Current Year Previous Year NPR USD NPR USD Grants&Contracts DirectRevenue 1.225.305,516.06 11,831553.70 1.378.698.759,62 13,217,614.72 Total 1,225.305,616.06 11,831,653.70 1,378.898,759.62 13,217,614.72 Schedule 12 Intra Company Grants and support Current Year Previous Year NPR USD NPR USD ICR Revenue 15,546.73 0.01 Private Resicted Fund Adjust 174,601,146.07 1.682,679,93 118,642,091.43 1,140.508,57 Total 174,615,592.81 1,682,679.64 118,642,091.43 1,140,508.57 Schedule 13 Cash donationfother sources Current Year Previous Year NPR USD NPR USD Cash donatinilther sources 3,296,317.23 31,965.35 1,467r635,iG 14,452.23 Total 3,296,317.23 31,966.36 1,467,535.16 14,462.23 4 O Schedule 14 Subarants expense Current Year Previous Year NPR USD NPR USD Grants to Organizations 1,550,000.00 15.22057 50,000,00 484.69 Sub-Awards to Organizations 648,341,919.78 6,254,651,65 641.677,527.64 6,130,086,46 Total 649,891,919.78 6,269,872.22 641,927,627,64 6,130571.15 Schedule 16 Personnel expense Current Year Previous Year NPR USD NPR USD Other Personnel Expenses 1,228,082,68 11,934.90 1,941,720.74 18,437.79 SalariesfBenefits - Domestic 408,095,076.69 3,949,561.89 377.917,242.29 3,616,291.30 SalariestBenefits - Intl 28.098.240,18 270,818.99 22,558.931.87 215,340.16 Staff Development Expenses 1.222.227,68 11.918 92 4,396,552.56 415116 Total 438,643,627.23 4,244,234.70 406,814,447.48 3,891.580.93 Schedule 16 MaterlafServices Current Year Previous Year NPR USD NPR USD Office/Misc Supplies 5.136.543.25 49,771.37 9,514.298.88 90,467.58 Other Materials/Svcs 996,885.41 9,421.04 396,600.87 3.713.31 PostagelMailing Supplies 135.000.50 1,314.15 121.003,94 1,147.38 PrintinglPromo Items 11,078,123.52 107,111.52 7,902,284.49 75,216.87 Proj Delivery Malls/Svcs 75,680,54068 723,444.87 136,165,523.16 1.300,164-07 Purchased Food CommolSvcs - - 41.218,00 384.73 Public Relations/Advertising 848,590.21 8.215.97 1,490.444.68 13,869.77 Training Materials/Svcs 44.315,995.25 428.494.97 66,551,061.81 631,33999 Total 138.191.678.82 1,327,773.89 222,184,435.83 2,116,303.70 Schedule 17 Intra Company grants and support Current Year Previous Year NPR USD NPR USD ICR Expense 62,452,378.43 603,217.48 64.709,021.57 524.064.16 Prior yearls ICR Adj 5,349,525470 5 52,24 (8,892,809.33) (84.037.08) Total 67,801,904.13 655.542.43 45,816,212.24 440,027.08 p,0 7t.Up zll, 0,- Schedule 18 Professiornal Services Current Year Previous Year NPIR USD NPR USD Audit/Accounting Fees 1.586,632,10 15,059.46 1,137,670.67 10,800.05 Consultant Fees 54,535,090.34 527,395.8 79,863,172.17 759,540,30 IT Services Fee 3,938,387.93 37,871.30 3,145,725.48 30,204.42 Payroll 5vc(HR Agency Fees - -86,027.34 818.60 Legal Services 56,500.00 519.66 15,396.79 146-33 Other Professional Fees 2,427,201 M 2 3 ,4 1 0 .7 8 1,983.443.19 18,874.49 Total 52,543,812.31 604,257.03 86,232,035.64 820,444.19 ScheduleI19 Travel and Transportation Current Year Previous Year NPR USD NPR ~ USD RepresentatiordEntertainment 23,564-83 228.95 493,677.24 4,634.27 Transportation Fare 35,733,048.90 345,981.00 39,492,915.05 374,583.89 Transportation Fare Int 6,882,690.52 06,325.80 10,833,200.17 103,508.35 Travel Insurance -(0.00) Vehicle Opns/Maint 8,750.33502 84.217.81 10,131,403.41 96,236.84 Vehicle Purchases/Rental 10,3804334j 0068363 15,458,325,30__ 145T122-0l Total 61 ,770,O72.81 597,437.19 76,409,522.17 724,085.36 Schedule 20 inancing/Miscelleaneous Current Year Provlous Year NPR USID NPR USD Bad Debt Expense (28,775.42) (194.12) - Bank/Credit Card Fees 64,232.55 625.33 114,917.31 1.083-88 Depreciation 19,374,908.33 167,907.61 21,856,911. 39 208838.10 Misr,ellaneous Other Expenses 290.215.29 2,848.57 284,121.58 3,149.60 Miscellanieous Taxes/Fees 2,057,301.34 20241.22 852,454.50 8,242,83 Brokerage Fees/Commission --213.00 2.00 Other Financing Costs (36,245.71) 1 3 5 5 . 9 6 ) -_________________ Total 21,721,636.37 211,072.65 210,7.9 221,316.41 0 L. UA4 Schedule 21 Occupancy related expense Current Year Previous Year NPR USD NPR USD Building Repairs/Maintlimprovements 197.761,06 1,905.83 475,277.74 4.535.20 Communications Expense 2,609.245.10 25.284-97 4,214,015.55 39,740.90 Facilities Rental/Leasehold Improvement 10,158,791.37 98,502.68 12,435,414.81 117,986.01 Insurance Expense 4,173,977.68 41,434.70 3,516,991.05 32,627.63 Utififies Expense 1,685,499.66 16,352-30 1,888.516.87 17,951.52 Total 18,825,274.87 183,480.48 22,530,216.02 212,841.27 Schedule 22 Equipment Purchased Current Year Previous Year NPR USD NPR USD Communications Equipment 290,792.16 2,718.63 273,021.35 2,611.42 Computer Hardware 9,501.064.90 91,366.68 15,475,301.71 146,481.87 Computer Software 145,465.20 1.433.58 660,037.29 6,268.99 Machineries/Other Eqpt 2,669,679.57 25,597.70 5,907,819.27 65,279.52 Office Eqpt 214,350.17 2,089.94 440,904,74 4,294.80 Office Fumitures/Fixtures 24502870 2,38629 1 66614346301 1551864 Total 13,086,830.70 125,592.82 24,418,547.37 230,455.23 Schedule 23 Realised exchange gains/liosses Current Year Previous Year NPR USD NPR USD Foreign exchange adjustment 4,965,337.97 (799.92L(6985,630.) )(0.00) Total 4,96,337.97 (799.92) (6,985,630.51 (000) 1A Up. 0- CARE Nepal Schedule 24: Significant accounting policies & Other Explanatory Notes For the Period: 1 July 2017 to 16 July 2018 1. Background CARE has been working in Nepal since 1978. Its initial focus was on addressing the basic needs of the poor and vulnerable 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 justice. 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 pursues a partnership modality and 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 2018, income and expenditure account and cash flow statement for the period of 1 July 2017 to 16 July 2018 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 USA 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 multiple 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. c-t CARE Nepal Schedule 24: Significant accounting policies & Other Explanatory Notes For the Period: 1 July 2017 to 16 July 2018 All the balance sheet items representing other than NPR are revalued with the exchange rate of 16 July 2018 (generated from www.oanda.com) and resulting revaluation gain and loss has been manually adjusted in the financial statements. 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 CARE Nepal follows the same revenue recognition policy as followed by CARE USA i.e. for unrestricted and temporarily restricted (Private) grants, revenue is recognized at the time of receipt of grants, and for restricted grants, revenue is recognized when the expense is incurred. The process of revenue recognition is: * All expenses recorded in GL (General Ledger) and AP (Accounts Payable) is collected into Project Costing. All these collected data have an accounting period associated with them. * For the restricted grants, the expenses are then classified as "billable" within the database. * All billable expenses within a specified. accounting period are then recognized as revenue via the revenue recognition process and billing process. * During the billing process, invoice date is usually the end of the accounting month for which the billing is run. * Once revenue recognition is completed, initially it is shown as unbilled revenue and finally accounted as receivables from respective donors. Fund generated in country out of the sale of assets and others if any is also considered as unrestricted revenue and recognized as revenue accordingly. B. 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. 9. Fixed Assets and Depreciation CARE Nepal has adopted the policy of capitalizing property and equipment if the cost of the individual item exceeds USD 25,000.00 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. CARE Nepal thereafter recovers the cost of the vehicle/depreciation from the project within a period of six years. 10. Inventory/Consumable Items Inventories procured during the year have been recognized as expenditure at the time of purchase. coo nrd CARE Nepal Schedule 24; Significant accounting policies & Other Explanatory Notes For the Period: 1 July 2017 to 16 July 2018 11. 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. Initially maximum cashable accrual limit was 30 days but with the introduction of new labor law the limit has been increased up to 90 days effective from 1 January 2018. 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 1 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) Self-insurance: 3.5% of employee basic salary is accrued on monthly basis to pay annual medical claims of staffs. f) Catastrophic illness: 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. 1,R. Up, CO~'< CARE Nepal Significant accounting policies & Other Explanatory Notes For the Period: 1 July 2017 to 16 July 2018 Other Explanatory Notes 1. Period of Financial Statement and Cut-off The financial statements have been prepared considering the Nepal Financial Year from 16 July 2017 to 16 July 2018 from the current year against a practice of 1 July to 30 June in the earlier years to coincide with the accounting period prescribed by the Income Tax Act 2058. Because of the change in the accounting period, the income and expenditure presented for certain items would be for a period of 12.5 months i.e., from 1 July 2017 to 16 July 2018. In doing so, following cut off for assets, liabilities and expenditure have been considered: a) All assets and liabilities except those relating to payroll costs of CARE Nepal and partner NGO's costs are stated as of 16 July 2018. b) Payroll costs are considered from 1 July 2017 to 30 June 2018. c) Partner NGO's expenses are considered from 1 July 2017 to 30 June 2018. d) Regular and routine transactions are accrued till 16 July 2018. 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 gainloss 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 Bank Cash and bank balances consist 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 2018: Amount in NPR Amount in USD Description Current Year Previous Year Current Year Previous Year Cash in Hand 920,527.45 970,001.01 8,337.54 9,266.32 Cash at Bank 92,222,654.29 50,972,146.54 835,292,93 486,931,68 Cash in transit (629,725.53) 6,381,711.46 (5,703-64) 60,963.83 otal 92,513,466.21 58,323,859.01 837,926.82 557,161.83 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 in the bank in the subsequent months. I.R.K U , CARE Nepal Significant accounting policies & Other Explanatory Notes For the Period: 1 July 2017 to 16 July 2018 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 2018. 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 2018: Amount in NPR Amount In USD Particulars Current Year Previous Year Current Year Previous Year Grants/Contracts Payable 34,243,330.47 73,159,37978 310,153 86 698,884.04 Total 34,243,330.47 73,159,379.78 310,153.86 698,884.04 6. Indirect Cost Recovery (ICR) ICR is the cost recorded/recovered as per the rate agreed between Donor and CARE USA. During FY 2018, NPR 67,801,904.13 (USD 655.542.43) 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 2018 are shown below: Amount in NPR Amount in USD Accruals Current Year Previous Year Current Year Previous Year Gratuity (244100) (71,741,620.21) (56,926,617.56) (649,789.02) (543,814.13) Leave (241200) (34,942,014.24)) (22,471,574.2) (316,482.08) (214,668.64) Medical insurance (21,281,263.65) (26,985,680-1) (192,751.87) (257,791.43) (241105) Total (93,022,883.86) (106,383,871.86) (1,159,022.97) (1,016,274.2) Note: As required by the new labor law, CARE Nepal is yet to deposit the accumulated accrual against the gratuity 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. At the year end, all gain/loss are transferred to CARE USA with no material impact on CARE Nepal financial statements. CARE Nepal Significant accounting policies & Other Explanatory Notes For the Period: 1 July 2017 to 16 July 2018 9. Fixed assets Fixed asset includes item with the individual value of above USD 25,000. The movement of fixed assets during this period is shown below: Amount in USD Particulars Current Year Previous Year Brought forward fixed assets (net of depreciation) 153,129.73 285, 361-66 Net Additions - 45,656.03 Depreciation (128,972.01) (177,887.96) Closing Balance (24,157.72) 153,129.73 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 4,965,337.97. Details are presented in the table below: Particulars Amount in NPR 15 days transaction impact of Efflux 252,008,39 Difference out of manual adjustment from USD to NPR 4,713,329.58 Total 4,965,337.97 11. Contingent Liabilities CARE Nepal does not have any contingent liabilities as on 16 July 2018. 12. Comparative Figures Figures of the financial statements are regrouped and rearranged where necessary to make them comparable with previous year balances and equivalent Nepalese Rupees for previous year except in the cash flow statement has been computed for better comparison to the stakeholders. 13. Presented Currency All the figures mentioned in the financial statement except cash flow statement and schedules along with significant accounting policies and notes to the accounts are presented in both US Dollars and Nepalese Rupees. Comparative figure of previous year is not presented in Nepalese Rupees in the cash flow statement. TI? CARE Nepal Budget Vs Expense for the period of July 1 2017 to July 16 2018 Fund code Project Name Annual Oudget (In Fund received (in Expendilture (in USO) Expenditure (NPRJ USD] USO AT121 SAKCHAM II / RV NPL ADA - 2,58133 AT123 SHUBHA YATRA NPL EC 37.26 AT325 Shakti III Nepal EC 2,816.79 AT384 Shakti-TP (2,916.93) AT388 Sakcham II - TP (2,587.3) AT391 Shubha Yatra - NPL - TP (90.27i AT396 5amrakshan -TP (33-89) AT415 NP-SA