Islamic Republic of Afghanistan
Supreme Audit Office
AUDIT REPORT
FY 1397 (2018)
P119047 H-732-AF, H-8930 Financial Sector Rapid Response
& D-1400 Project
Í1
Islamic Republic of Afghanistan
Supreme Audit Office
Reference Number: Date: \
Auditor General's Report
To,$
His Excellency,
Minister of Finance,
Government of Islamic Republic of Afghanistan
Report on the Audit of the Financial Statements
Opinion
We have audited the accompanying Statements of Cash Receipts and Payments (the "Financial
Statements") of Financial Sector Rapid Response Project (FSRRP) bearing World Bank Project
ID Number PI19047 financed under Grant Number H-732-AF, H-8930 & D-1400 (hereinafter
referred to as "Project") for the financial year ended 30 Qaws 1397 (21 December 2018), which
comprise the summary of significant accounting policies and other explanatory notes forming part
of the financial statements.
In our opinion, the accompanying financial statements present fairly, in all material respects, the
cash receipts and payments of the Project for the financial year ended on 30 Qaws 1397 (21
December 2018) in accordance with Cash Basis IPSAS (International Public Sector Accounting
Standard) - "Financial Reporting under the Cash Basis of Accounting" and comply with the terms
and conditions of Project's Grant/ or Financing Agreement.
Basis for Opinion
We conducted our audit in accordance with International Standards of Supreme Audit Institutions
("ISSAls"). 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 the Supreme
Audit Institution (SAI) of Islamic Republic of Afghanistan and independently derive our legal
mandate from the Supreme Audit Office Law and in accordance with the Code of Ethics
implemented by the SAO based on the ISSAI 130- Code of Ethics together with the ethical
requirements that are relevant to our audit of the financial statements in Afghanistan and applicable
to SAO auditors including external experts for the audit, and we have fulfilled our other ethical
responsibilities in accordance with these requirements and the Code of Ethics of SAO.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Page 1 of 3
Responsibilities of Ministry of Finance for the Financial Statements
The Ministry of Finance is responsible for the preparation and fair presentation of the project
financial statements in accordance with International Public Sector Accounting Standards
"Financial Reporting under the Cash Basis of Accounting" and for such internal control as ministry
determines is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error and selecting and applying appropriate accounting
policies.
The ministry is also responsible for ensuring that activities and financial transactions and
information reflected in the Financial Statements are in compliance with the projects Grant/ or
Financing Agreement.
Those charged with governance of the ministry are responsible for overseeing the project's financial
reporting process.
Auditor's 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 auditor's 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 ISSAIs 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 ISSAls, we exercise professional judgment and maintain
professional skepticism 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.
* Evaluate the overall presentation, structure and content of the financial statements,
including the disclosures, and whether the financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
* Eva luate the financial transactions and information reflected in the Financial Statements and
whether they are in compliance with the terms and conditions of Project's Grant/ or
Financing Agreements.
We communicate with those charged with governance of the ministry regarding, among other
matters, the planned scope and timing of the audit and signifi Ludit findings, including any
significant deficiencies in internal control that we identify r{gw a udit.
Page 2 of 3
tif
We also provide those charged with governance of the ministry with a statement that we have
complied with relevant ethical requirements regarding independence, and to communicate with
them all relationships and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
Report on Other Requirements
Management Letter highlighting the areas of improvement in financial management including the
compliance with covenants of the Grant/ Financing Agreements and results of its operations for the
financial year ended on 30 Qaws 1397 (21 December 2018) has been attached to this report. These
observations and recommendation have been communicated to and discussed with project
management and intended to improve internal control and results in other operating efficiencies of
the Project.
Moh mmad Naie Haqmal
Aud orGener
Supre it Office
V~
Page 3 of 3
Islamic Republic of Afghanistan
Financial Sector Rapid Response Projeet
World Bank Reference: Proj eet ID P1 19047; Grant ID H7320, H8930 & D1400
i ri
Financial Statements for the year ended
30th Qaws 1397 (215t December, 2018)
Financial Sector Rapid Response Project
World Bank Reference: Project ID P119047; Grant ID H7320, H8930 & D1400
STATEMENT OF CASH RECEIPTS AND PAYMENTS
FOR THE YEAR ENDED 30 QAWS 1397 (21 DECEMBER 2018)
1397 1396 Cumulative
To Date
Receipts/ Receipts/
Payments Payments
Controlled by Controlled by
entity entity
USD USO USD
RECEIPTS
Initial Advance - 2,800,000
Replenishment 7,086,671 - 17,813,080
TOTAL RECEIPTS 7,086,671 - 20,613,080
PAYMENTS
Disbursement Category:
Goods, Non-Consulting Servcies, Consultants'
services, Incremental Operating Costs and
Training (except APS) 5,804,039 1,138,263 18,737,782
Goods, Non-Consulting Servcies, Consultants'
services, Incremental Operating Costs and
Training (for APS) - . -
Bank Charges 75 - 700
TOTAL PAYMENTS 5,804,114 1,138,263 18,738,482
Increase/(Decrease) in Cash & Cash Equivalents 1,282,557 (1,138,263) 1,874,598
Cash and Cash Equivalaents at the beginning of
the year 592,041 1,730,304
Increase/(Decrease) in Cash & Cash Equivalents 1,282,557 (1,138,263
Cash and Cash Equivalents at the end of the year 1,874,598 592,
The accompanying notes form an integral part of this financial statement.
Zahid Hamdard
Deputy Vinister for Finance
Ministry of Rirntce, Islamic Republic of Afghanistan
Dated: November 13, 2019
Financial Sector Rapid Response Project
(World Bank Reference: Project ID P119047; Grant ID 117320, 118930 & D1400)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 QAWS 1397 (21 DECEMBER 2018)
1) LEGAL STATUS AND ACTIVITY
a) The Financial Sector Rapid Response Project was set up on August 27, 2011. The project's
objective is to assist the Da Afghanistan Bank to develop actions plans for improved banking
supervision and implement a modern national payment system for efficient and transparent
payment transactions.
b) The project was initially funded by a grant bearing reference number H7320 from International
Development Association in the amount equivalent to Special Drawing Rights (SDR) 11,900,000.
In June 2014, another grant bearing reference number H8930 was provided in the amount
equivalent to Special Drawing Rights (SDR) 4,400,000 and another grant bearing reference
number D1400 has been provided during the financial year 1396 in the amount equivalent to
Special Drawing Rights (SDR) 14,400,000, although there were no disbursements from it during
the reporting period,
c) The project consists of the following parts:
i) Audits of Commercial banks
ii) Modernization of ANPS
iii) Support to Afghanistan Institute of Bank and Finance
iv) Technical Assistance, Training and Project Implementation
d) The significant terms and conditions that determine or affect the availability of the funding
assistance are primarily the presentation of the eligible expenditures to donor within the period as
per and in accordance with the financing agreement.
e) These financial statements of the Project have been prepared in acc areetilaui ments
of the Development Grant Agreements signed between the Gove m t ppuii c of
Afghanistan and the International Development Association fort .
2) SIGNIFICANT ACCOUNTING POLICIES tr
a) Basis of Preparation
The financial statements are prepared under the historical cost c ad in dr r with
Cash Basis IPSAS - Financial Reporting under the Cash Ba 'ca % dd by
International Federation of Accountants (IFAC).
b) Reporting Entity
These financial statements are for the Project referred to in para 1(a) which is funded by the
grants as specified in para 1(b) and encompass the operations of the project to the extent funded
by those grants.
c) Payments
Payments made from Special Account are recognised in the financial statements based on the
date the cheque is issued and direct payments by World Bank are recognised on the date on
which the withdrawal application for the payment is submitted to the World Bank. However,
Financial Sector Rapid Response Project
(World Bank Reference: Project ID P119047; Grant ID 117320, 118930 & D1400)
cheques or withdrawal applications that were ultimately rejected by the bank or the World Bank are
reversed in the reporting period.
d) Reporting Currency
The reporting currency is US Dollars. Since US Dollars is the principal disbursement currency of
the donor, the financial statements are not prepared in the Afghani which is the currency of
Afghanistan.
e) Currency translations
Transactions in currencies other than the reporting currency are translated into US Dollar at the
rate of exchange at which the transaction is actually executed.
3) NOTES TO ACCOUNTS
a) Receipts
These represent grants and aid received during the period.
b) Initial Advance
Initial advance represents the advance given by the World Bank into the designated bank
account(s) of the project.
c) Bank Charges
The Ministry of Finance has negotiated with Da Afghanistan Bank that bank charges will not be
charged on the transactions in the US Dollar Special bank account of the grant. Bank Charges
may be levied by intermediary banks on deposits into the Special Account and balances returned
to the World Bank.
d) Comparison of Budget and Actual Amounts
The Project, being the reporting entity for the purpose of these financial statements, in its capacity
as such does not make its annual approved budget publicly available nor is its budget explicitly
available publicly in the compiled approved budget in a manner purposeful to the context of these
financial statements. Thus, the requirement of presenting a comparison of budget and actual
amounts is not considered contextually applicable.
e) Authorisation Date
These Financial Statements are authorised by the Deputy Minister for Fi e r, & inance
or any official acting on his behalf who has been so authorised to ac s-eadorsed the
Statement of Cash Receipts and Payments.
f) Appendices
The accompanying appendices provide additional information rtr nalysis and form an int
part of these notes, except as indicated otherwise,
g) Others r
These Financial Statements are originally prepared in English and th sa td mt y the
event of any inconsistency between the English and Dari versions, the velsa hall be
considered to be correct.
Financial Sector Rapid Response Project
World Bank Reference: Project ID P119047; Grant ID H7320, H8930 & D140(
APPENDIX Ai
SUMMARY OF WITHDRAWAL APPLICATIONS
FOR THE YEAR ENDED 30 QAWS 1397 (21 DECEMBER 2018)
Application Initial
Description Number Advance Amount
USD USD
H8930:
DA-B 8 1,048,712
H7320:
DA-A 24 5,250,000
DA-A 22 787,959
Financial Sector Rapid Response Project
World Bank Reference: Project ID P119047; Grant ID H7320, H8930 & D1400
APPENDIX A2
US Dollar SPECIAL ACCOUNT SUMMARY
FOR THE YEAR ENDED 30 QAWS 1397 (21 DECEMBER 2018)
Account No: 27419
Depository Bank: Da Afghanistan Bank (DAB)
Address: Kabul
USD
Opening Balance as per Bank Statement 592,041
Add:
Replenishment by World Bank 7,086,671
Total Additions 7,086,671
Deduct:
Payments for Project Expenditure 5,804,039
Bank Charges 75
Total Deductions 5,804,114
Closing Balance as per B.S 30 QAWS 1397 (21 DECEMBER 2018) 1,874,598
Financial Sector Rapid Response Project
World Bank Reference: Project ID P119047; Grant ID H7320, H8930 & D1400
APPENDIX A3
US DOLLAR SPECIAL ACCOUNT RECONCILIATION
FOR THE YEAR ENDED 30 QAWS 1397 (21 DECEMBER 2018)
Account No: 27419
Depository Bank: Da Afghanistan Bank (DAB)
Address: Kabul
USD
Closing Balance as per bank statement - 30 QAWS 1397 (21 DECEMBER 2018) 1,874,598
Closing balance as per financial statements - 30 QAWS 1397 (21 DECEMBER 2018) 1,874,598
Financial Sector Rapid Response Project
World Bank Reference: Project ID P119047; Grant ID H7320, H8930 & D1400
APPENDIX A4
COMPONENT-WISE DISBURSEMENTS
FOR THE YEAR ENDED 30 QAWS 1397 (21 DECEMBER 2018)
(not an integral part of the Financial Statements)
1397 1396 Cumulative To
Project Component Date
USD USD USD
Audits of Commercial banks 5,804,039 1,138,263 11,265,104
Modernization of ANPS -
Support to Afghanistan Institute of Bank and Finance - 104,146
Technical Assistance, Training and Project Implementation - 7,368,532
Bank Charges 75 - 700
TOTAL PAYMENTS 5,804,114 1,138,263 18,738,482
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