W U W W W U Social Assistance System Strengthening Project W (Under the Financing Agreement for Credit No. IDA 5354 - VN * between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA")) U Financial statements For the year ended 31 December 2018 U * 2.8~I~ W g Social Assistance System Strengthening Project * Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') U U CONTENTS Pages Report of Project Management Unit 1-2 Independent auditor's report on the financial statements 3-4 Statement of off-budget assets, liabilities and fund balance 5 Statement of off-budget income and expenditure 6 Statement of off-budget sources and uses of funds 7 Statement of off-budget designated accounts 8 Statement of off-budget withdrawals 9 Statement of on-budget sources and uses of funds 10 Statement of on-budget uses of funds detailed by province 11 Statement of on-budget foreign currency deposit account 12 Notes to the financial statements 13-22 Independent assurance report on compliance 23-24 Independent assurance report on effectiveness of internal control 25 - 26 Appendix 1: Management letter 1 -28 U U U M M U U U U U U g Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') REPORT OF PROJECT MANAGEMENT UNIT Project Management of Social Assistance System Strengthening Project ("Project Management") presents this report and the financial statements of Social Assistance System Strengthening Project ("the Project") as at 31 December 2018 and for the year then ended. THE PROJECT MANAGEMENT'S RESPONSIBILITY IN RESPECT OF THE FINANCIAL STATEMENTS Project Management is responsible for the financial statements as at 31 December 2018 and for the year then ended which presents fairly: > assets, liabilities and fund balance as at 31 December 2018; > income and expenditure for the year ended 31 December 2018; > balances of the designated account as at 31 December 2018 and the movements of this account NG for the year then ended; > statements of expenditures for the year ended 31 December 2018; and > sources and uses of funds for the year ended 31 December 2018. In preparing these financial statements, Project Management is required to: select suitable accounting policies and then apply them consistently in accordance with the Financing Agreement for Credit No. IDA 5354 - VN ("Financing Agreement") between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA"), the Project Operation Manual ("POM"), other applicable laws and regulations; > state whether applicable accounting policies have been followed, subject to any material departures disclosed and explained in the financial statements; and > design and implement an effective internal control to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error. Project Management is responsible for ensuring that proper accounting records are kept, which disclose, with reasonable accuracy of assets, liabilities, funds balance, its income and expenses, and sources and uses of funds of Project for the reporting period and accounting books compliance with POM. They are also responsible for safeguarding the assets of the Project and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Project Management confirms that they have complied with the above requirements in preparing the financial statements. U U U U U1 U Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA") REPORT OF PROJECT MANAGEMENT UNIT (continued) U STATEMENT BY PROJECT MANAGEMENT Project Management does hereby state that, in its opinion: the accompanying financial statements give a true and fair view of the financial position of the Project as at 31 December 2018, the income and expenditure and sources and uses of funds for the year then ended in accordance with the accounting policies as described in Note 3 to the financial statements and POM; the funds provided by IDA and the Government of Vietnam are utilised for the purposes defined in the Financing Agreement; the Project complies with the Financing Agreement, POM, and other applicable laws and regulations; and the Project designs and implements an effective internal control to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error, as well as to ensure compliance with the Financing Agreement, POM, laws and regulations applicable to the Project. For and on behalf of Project Management Dang Kim Chung Project Director Hanoi, Vietnam 28 June 2019 U2 W U U U U U 2 SErnst & Young Vietnam Limited Tel: +84 24 3831 5100 8th Floor, CornerStone Buildng Fax: +84 24 3831 5090 16 Phan Chu Tr nh Striet ey.coml Hoan Kipm D ,stir ict Building a better el n Km Vsetnam working world Ho,S6fVenr Reference: 61430372/20994843-HN INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS To: Project Management of the Social Assistance System Strengthening Project Opinion We have audited the financial statements of Social Assistance System Strengthening Project ("the Project"), as set out on pages 5 to 22, which comprise of the statement of off-budget assets, liabilities and fund balance as at 31 December 2018, the statement of off-budget income and expenditure, the statement of off-budget sources and uses of funds, the statement of off-budget designated account, the statement of off-budget withdrawals, the statement of on-budget sources and uses of funds, the statement of on-budget uses of funds detailed by province and the statement of on-budget foreign currency deposit account for the year ended 31 December 2018 and the notes to the financial statements, including a summary of significant accounting policies. In our opinion, the accompanying financial statements of the Project are prepared, in all material respects, in accordance with the accounting policies as described in Note 3 to the financial statements and Project Operation Manual ("POM"). Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISA). 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 independent of the Project in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the financial statements in Vietnam, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Emphasis of Matter - Accounting policies We draw attention to Note 3 to the financial statements, which describes the accounting policies. Our opinion is not modified in respect of this matter. Responsibilities of Project Management to the Financial Statements Project management is responsible for the preparation of these financial statements in accordance with the accounting policies as described in Note 3 to the financial statements and POM, and for such internal control as Project management determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error. 3 U Bud nga btte 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 ISA 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 ISA, 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. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. We communicate with the Project management 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. For and on behalf of Ernst & Young Vietnam Limited Nguyen Thai Thanh Deputy General Director Audit Practising Registration Certificate No. 0402-2018-004-1 U Hanoi, Vietnam W 28 June 2019 4 U U 4 g Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') STATEMENT OF OFF-BUDGET ASSETS, LIABILITIES AND FUND BALANCE as at 31 December 2018 Currency: VND ITEMS Notes Ending balance Beginning balance * ASSETS Cash 4 16,547,209,331 38,664,480,603 Cash on hand 26,541,980 37,604,457 Cash in bank 16,520,667,351 38,626,876,146 Account receivables 9,935,135,848 21,894,842,618 Advances 5 9,596,425,518 21,532,443,013 Other receivables 336,603,010 351,857,085 Advances to employees 2,107,320 10,542,520 Fixed assets 4,744,510,299 5,477,658,621 Tangible fixed assets Tangible fixed assets, at cost 7,785,612,937 7,785,612,937 Less accumulated amortization (3,050,569,306) (2,322,154,317) Tangible fixed assets, net book value 4,735,043,631 5,463,458,620 Intangible fixed assets Intangible assets, at cost 26,500,000 26,500,000 Less accumulated amortization (17,033,332) (12,299,999) Intangible assets, net book value 9,466,668 14,200,001 TOTAL ASSETS 31,226,855,478 66,036,981,842 LIABILITIES AND FUND BALANCE Short - term liabilities 590,442,450 28,405,713,679 Payables 6 482,137,094 28,370,422,393 Taxes and amounts payable to the State 40,442,925 35,291,286 budget Other payables 67,862,431 - Fund balance 14,886,633,314 23,316,105,625 Represented by contributions from - IDA Fund 10,032,538,287 22,696,630,407 - Counterpart fund - 590,395,208 - Other fund 4,854,095,027 29,080,010 Foreign exchange difference 11,005,269,415 8,837,503,917 Funds for fixed assets acquisition 4,744,510,299 5,477,658,621 TOTAL LIABILITIES AND FUND BALANCE 31,226,855,478 66,036,981,842 Pham Quang Hau Nguyen Thi Sen Dang Kim Chung Preparer Chief Accountant Project Director Hanoi, Vietnam 28 June 2019 5 U W g Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') STATEMENT OF OFF-BUDGET INCOME AND EXPENDITURE for the year ended 31 December 2018 Currency: VND For the year ended Cumulative to Notes 31 December 2018 31 December 2018 INCOME Contribution from International Development Association (IDA) 7.1 78,743,003,800 534,592,136,170 Contribution from the Government of Vietnam 8 3,801,729,847 19,546,695,912 Other income 4,855,095,027 4,975,893,486 TOTAL INCOME 87,399,828,674 559,114,725,568 EXPENDITURE 9 Part 1: Strengthening the Social Assistance and Poverty Reduction System 65,871,963,478 391,047,971,427 In which: Expenses for building an integrated management information system MIS1 and buying hardware for 59 provinces 26,918,336,150 79,339,142,850 Part 2: Launching a Consolidated Social Assistance Program 17,626,827,943 86,445,008,903 Part 2.1: Transfers of benefits to additional beneficiaries identified by the management information system Part 2.2: Transfers of service fees to the VN POST of the Project Provinces for the purpose of implementing the Transfers, including Benefits Transfers 17,626,827,943 86,445,008,903 Part 3: Project Management 12,330,509,564 66,735,111,924 TOTAL EXPENDITURE 95,829,300,985 544,228,092,254 (SHORTAGE)/SURPLUS OF (8,429,472,311) 14,886,633,314 EXPENDITURE OVER INCOME Pham Quang Hau Nguyen Thi Sen Dang Kim Chung Preparer Chief Accountant Project Director U Hanoi, Vietnam U 28 June 2019 6 6 U � � � �ц о cv со оэ � о м м v v v Fo �rnv й •нo- ти й йй й м � со и м �ё c�i � �б � Н м м и и н � v о о � о ш ш м � и о йv� � v м v vм й оfOо � иии � о м v �rr н оо vйv о� °�' t°т �ш а � � м .- и й и и и м � О а ,, о и � � � ' й й N � i (� �� а а v а о � О с- _ L N �' М М о Т W ' �"' - "С U � � � -с с0 00 1� 1� О л - �.��h .. 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Q ~ � � � N � � и � ш ш.с� с � ш� д к Е-� С'� Ш � Ш (� р Ш�' и д �.тд �_ � иё��глtп..�в�'��� ш�г �- _- с � �� I- � � о� о; ш R ш Г�г ш �.cN ис"г ш= r 10 �а � Q- � � U с и с L а С г�у Q �, r'й 'С .,. о. т = N � �> Q Ш � о и о о х г� о к�� го и т.� i т о и Х � Ш � � � � � СП � и= с с�¢U О� ш ад �Ш Е-Qa ¢а o�i- а и- ш д� 2 N � � � Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') STATEMENT OF OFF-BUDGET DESIGNATED ACCOUNT as at 31 December 2018 and for the year then ended El Bank account 21110370049970 Service bank Joint Stock Bank for Investment and Development of Vietnam - Hanoi Branch Address No 4B, Le Thanh Tong Street, Hoan Kiem District, Hanoi City, Vietnam Financing Agreement 5354-VN Currency USD BALANCES AND MOVEMENTS OF OFF-BUDGET DESIGNATED ACCOUNT Note USD VND equivalent Balances as at 31 December 2017 1,691,550.68 37,950,249,101 Add Amount received from International Development Association (IDA) 7.2 3,492,400.00 78,743,003,800 M Foreign exchange difference 2,167,765,498 M Deduct Total amount withdrawn 4,458,928.72 102,417,174,853 M Bank charges 1,180.67 27,123,089 Balances as at 31 December 2018 723,841.29 16,416,720,457 M Balances as at 31 December 2018 as per M bank statement 723,841.29 16,416,720,457_ M RECONCILIATION OF OFF-BUDGET DESIGNATED ACCOUNT IS USD M Amount advanced by International Development Association at the M beginning of the year 3,673,716.10 Additional advances from International Development Association in the year 3,492,400.00 M Deduct: Total amount claimed for advance clearance in the year 5,067,971.96 M Advance to designated account as at 31 December 2018 2,098,144.14 Balance of designated account as at 31 December 2018 723,841.29 M Add: Amount withdrawn and not yet claimed as at 31 December 2018 1,374,302.85 M Total advance to designated account as at 31 December 2018 2,098,144.14 M M M Pham Quang Hau Nguyen Thi Sen Dahg Kim Chung Ell Preparer Chief Accountant Project Director M Hanoi, Vietnam M 28 June 2019 8 M ■ ■ ■ z о , „ , � � , � � � � � о ■ � � � с°'i а ш ш �. с� �t и м ■ о U i а? �� � с� г� и ti � с ш�� т � Nv г аоо � � � о т�, N г� с� oi � � с � и о" о �й � ti �'� � �`�- о со .- о о � о _ _ .. �- о > о г� с� cv �л с� � � ■ � а � е- N .„ U N а � Q � � � со ° � У � � Е � ,и�а ti оо о ti '°'°' � � � й оо о о о ао � � о ■ о м о о о м Q� j � Е� rn °о °v� м k. а `т а и r� �л с� с� ■ о ш � о оо и г� , U � с0 V О �t � -Q -р N N с- м N � °- аи о � ш со со й о 0 о о � � т ' � л п5 Q т � � � й �� �, Г Q ■ � й � � о �, ш � � � � � г�`�, N � � � � ■ � �� г� � v �- о� > Е т N � N й � � о� � С� � о т р° о �°� о о � с с� � т Г N N И N (� � °-' �с о ■ i'' � о о� о~о. °о °о оо, о~о � c�i � о U .,_, � Q о о � � � > � Е м °оо °о м �,а �р � �� т и v о v м в>.с � � о Q ti ооио rn tN\. 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Q� о М j О О N ь М С� а'о �`'� � а шia iв У.д R � U и LL � U И +-�„ U U L И (6 и � Q О�в а f6 � о� Q- о- ° д т°г° _ ■ (Л с �4Г -по.�а� ...v vo � rn и �� F- Qi \ yN �Q Q �0 a�N � � � Q �ш Ш� т�о�,ас� � о� ��, г� � о � _ � Е ш � �л ш� 3 Ем �д � � � �о ш'' п Е��-``�о� fбv �Е а�' � с � ш �т�, �ш �а� � т �о � 'V шш �� � о���_� �,v о� о- -� ■ СЛ �� й� � Q�o ��'S �-° й Q�o а� = ос�о ■ ■ ■ N N Social Assistance System Strengthening Project E Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') STATEMENT OF ON-BUDGET SOURCES AND USES OF FUNDS for the year ended 31 December 2018 Currency: VND For the year Cumulative to ended 31 31 December Items Notes December 2018 2018 FUND ALLOCATION Fund from IDA 118,839,282,324 TOTAL 118,839,282,324 USED OF FUNDS Part 2.1: Transfers of benefits to additional beneficiaries identified by the management information system 8,118,330,000 51,605,790,000 TOTAL 8,118,330,000 51,605,790,000 AMOUNT BROUGHT FORWARD 67,233,492,324 The amount is being maintained in the State Treasury. Pham Quang Hau Nguy n Thi Sen Dang Kim Chung M Preparer Chief Accountant Project Director M Hanoi, Vietnam M 28 June 2019 IN M IN M M M M M M M 10 M g Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') STATEMENT OF ON-BUDGET USES OF FUNDS DETAILED BY PROVINCE for the year ended 31 December 2018 Currency: VND For the year ended 31 Cumulative to 31 No Province December 2018 December 2018 1 Ha Giang Province 4,108,790,000 24,957,910,000 2 Lam Dong Province 1,036,420,000 6,865,360,000 3 Quang Nam Province 1,904,560,000 13,956,280,000 4 Tra Vinh Province 1,068,560,000 5,826,240,000 8,118,330,000 51,605,790,000 Pham Quang Hau Nguyen Thi Sen Dang Kim Chung Preparer Chief Accountant Project Director Hanoi, Vietnam 28 June 2019 U M U U U1 W g Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') STATEMENT OF ON-BUDGET FOREIGN CURRENCY DEPOSIT ACCOUNT for the year ended 31 December 2018 BALANCE AND MOVEMENT OF FOREIGN CURRENCY ACCOUNT Currency: USD Money transferred from Money transferred from foreign currency account IDA to foreign curency to local currency in the Balance of foreign Year account State Treasury currency account 2016 5,425,708 5,425,708 2017 - - 2018 - - TOTAL 5,425,708 5,425,708 - MOVEMENT OF LOCAL CURRENCY ON THE STATE TREASURY Currency: VND Money received from foreign currency account Amount disbursed from Balance of local currency Year during the year the State Treasury in the State Treasury 2016 118,839,282,324 24,007,260,000 94,832,022,324 2017 - 19,480,200,000 75,351,822,324 2018 - 8,118,330,000 67,233,492,324 TOTAL 118,839,282,324 51,605,790,000 67,233,492,324 Pham Quang Hau Nguyen Thi Sen Dang Kim Chung Preparer Chief Accountant Project Director Hanoi, Vietnam 28 June 2019 12 U g Social Assistance System Strengthening Project * Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA") NOTE TO THE FINANCIAL STATEMENTS as at 31 December 2018 and for the year then ended 1. PROJECT INFORMATION The Social Assistance System Strengthening Project ("Financing Agreement") was signed on 24 April 2014 by the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA") with the amount of US$ 60 million to finance for the Social Assistance System Strengthening Project ("the Project") and be effective from 22 July 2014. Counterpart fund is approximately VND 52.59 billion, equivalent to US$ 2.5 million; in which, fund from State Budget of VND 10.10 billion and fund from Province Budget of VND 42.49 billion. The overall objective of the Project is to support the government in strengthening the social assistance system by developing innovations in management and service delivery nationwide, and by piloting these innovations in the 4 project provinces, including Ha Giang, TV Quang Nam, Lam Dong and Tra Vinh. H The Project is implemented by the Ministry of Labor-Invalids and Social Affairs, the NAI Government of the Socialist Republic of Vietnam and be decentralised to Central Project Management in Hanoi ("CPMU") and 4 Provincial Project Managements ("PPMU") in Ha Giang, Quang Nam, Lam Dong and Tra Vinh. The Project consists of 3 following components: (i) Part I - Strengthening the Social Assistance and Poverty Reduction System; Provision of support for the development and testing of improved mechanisms for social assistance delivery and management, including: Building a national database of social assistance beneficiaries and developing an integrated management information system (MIS) for nationwide use; Developing a social collaborator network in the Project Provinces and supporting communication - for - development activities at the national level and in the Project Provinces, including provision of remuneration for social collaborators; Developing and implementing a grievance redress mechanism in the Project Provinces; and Developing and implementing a monitoring and evaluation system, and providing support for policy formulation at the national level and in the Project Provinces. (ii) Part 2 - Launching a Consolidated Social Assistance Program; and Testing the improved mechanisms developed under Part I of the Project in the Project Provinces through the launching of social assistance consolidation, including: Part 2.1: Provision of Benefits to Additional Beneficiaries identified by the management information system; and Part 2.2: Provision of service fees to the VNPOST of the Project Provinces for the purpose of implementing the Transfers, including the Benefits. (iii) Part 3 - Project Management. Provision of support for Project management activities, including: Operation of the Central Project Management Unit (CPMU) and Provincial Project Managements Units (PPMUs); and Supervision, procurement, financial management, disbursement, audit, and monitoring and evaluation. 13 U g Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') NOTE TO THE FINANCIAL STATEMENTS (continued) as at 31 December 2018 and for the year then ended 2. BASIS OF PREPARATION Basis of preparation The Project's financial statements, except for the statement of designated account, are presented in Vietnam dong ("VND").The statement of designated account is presented in United States dollars ("USD"). The Project's financial statements are prepared in accordance with the accounting policies described in Circular No. 107/2017/TT-BTC issued by the Ministry of Finance, dated 10 October 2017, guiding the administrative and non-business accounting regime and Project Operation Manual ("POM"). This circular is effective since 1 January 2018 and replaces Decision No. 19/2006/Q]D-BTC issued by the Ministry of Finance, dated 30 March 2006, enforcing the regulations on administrative accounting and Circular No. 185/2010/TT-BTC, dated 15 November 2010, amending supplementing the public-sector administrative accounting issued under Decision No. 19/2006/Qf-BTC. Fiscal year The Project's fiscal year applicable for the preparation of its financial statements starts on 1 January and ends on 31 December. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies adopted in the preparation of the financial statements are set out below: Contribution from the International Development Association ("IDA") Contributions from IDA are recognised when cash is transferred to the Project's designated account which is managed by the CPMU or when payments are made directly to suppliers, rather than when being committed or budgeted. Contribution from the Government of Vietnam ("counterpart fund") Contribution from the Government of Vietnam (which is comprised of fund from State budget and fund from Province budget) are recognised when cash is deposited in the Project's State Treasury Accounts of Central Project Management Unit ("CPMU") and Provincial Project Managements Unit ("PPMU") in four provinces or when disbursements are made through the State Treasury Accounts at CPMU and PPMU at four provinces rather than when being committed or budgeted. Other income Other income include receivables from sales of bidding documents, bank interest, income from contractual penalties being recognised when cash is actually received into bank account. Expenditure Expense is recognised when activities are completed based on acceptance of work done or equivalent supporting documents, are within detailed budget and approved by the Project Director. 14 * Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') NOTE TO THE FINANCIAL STATEMENTS (continued) as at 31 December 2018 and for the year then ended 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Foreign exchange currency transactions Transactions in other currencies are converted into VND at the exchange rate ruling at the date of transaction which are determined as follows: Contribution received in foreign currency are recorded at the average monthly exchange rate determined by Ministry of Finance. Expense incurred in foreign currency are recorded at the actual exchange rate at the commercial bank. Disbursement transactions in foreign currency are recorded using first in, first out method (FIFO). Circular No. 107 does not require revaluation of monetary balances denominated in foreign currencies as at the end of the year. Tangible fixed assets Tangible fixed assets are stated in the statement of budget assets, liabilities and fund balance at cost less accumulated amortization. The cost of a tangible fixed asset comprises its purchase price and any directly attributable costs of bringing the tangible fixed asset to working condition for its intended use. When tangible fixed assets are sold or retired, cost and accumulated amortization are reduced from statement of assets, liabilities and fund balance and any proceeds from their disposal is included in the statement of income and expenditure. Intangible fixed assets Intangible fixed assets are stated in the statement of budget assets, liabilities and fund balance at cost less accumulated amortization. The cost of an intangible fixed asset comprises its purchase price and any directly attributable costs of preparing the intangible fixed asset for its intended use. When intangible fixed assets are sold or retired, cost and accumulated amortisation are reduced from statement of assets, liabilities and fund balance and any proceeds from their disposal is included in the statement of income and expenditure. Amortization Amortization of tangible fixed assets and intangible fixed assets are calculated on a straight- line basis over the estimated useful life. Annual amortization rate is determined according to Circular No. 45/2018/TT-BTC dated 7 May 2018 issued by the Ministry of Finance, details as follow: Machinery and equipment From 12.5% - 20% Means of transportation 6.67% Office equipment From 12.5% - 20% Computer software 16.67% Amotization is debited to funds for fixed assets acquisition on the balance sheet. Advances Advances includes advance to Departments of Labour - Invalids and Social Affairs, to suppliers and to the Project officers to implement the Project's activities are carried as part of the fund balance until subsequent liquidation or clearance at approval of the Project management. 1 U 15 U g Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA") NOTE TO THE FINANCIAL STATEMENTS (continued) as at 31 December 2018 and for the year then ended 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Payables Payables are recognised based on payment amount for goods and services being provided and certificate of work done or other similar related supporting documents are completed and approved by the Project management but not yet paid at the end of reporting period. Personal income tax not yet paid to the Tax Authority and social security contribution not yet paid to Social Insurance Body at the end of reporting period are stated as payables on statement of assets, liabilities and funds. C) Capital expenditure and inventory All items of capital expenditure and inventory are recognized as part of the Project's expenses at the time of payments. 4. CASH Currency: VND Ending Balance Opening Balance Cash at bank 16,520,667,351 38,626,876,146 Account in USD 16,416,720,457 37,950,249,101 Account in VND 103,946,894 676,627,045 Cash on hand 26,541,980 37,604,457 TOTAL 16,547,209,331 38,664,480,603 5. ADVANCES Currency: VND Ending Balance Opening Balance Provincial Departments of Labor-Invalids and Social Affairs 9,453,250,769 11,566,080,513 Transformation & Change Management Consulting Co., Ltd 143,174,749 Tri Nam Investment and Technology JSC - 9,966,362,500 TOTAL 9,596,425,518 21,532,443,013 16 U * Social Assistance System Strengthening Project * Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') U NOTE TO THE FINANCIAL STATEMENTS (continued) as at 31 December 2018 and for the year then ended 6. PAYABLES Currency: VND Ending Balance Opening Balance Provincial Departments of Labor-Invalids and Social Affairs 154,087,716 Ha Giang Post Office 37,626,000 2,652,570,000 FPT Information Systerm Co., Ltd - Lotus Gold Vietnam JSC - 19,967,904,085 Quang Nam Post Office - 3,737,712,992 Tra Vinh Post Office - 888,065,592 Lam Dong Post Office - 463,552,740 Ef Others 290,423,378 660,616,984 TOTAL 482,137,094 28,370,422,393 17 U g Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') NOTE TO THE FINANCIAL STATEMENTS (continued) as at 31 December 2018 and for the year then ended 7. CONTRIBUTION FROM INTERNATIONAL DEVELOPMENT ASSOCIATION ("IDA") 7.1 Contribution from IDA U Total amount actually received in the designated account USD VND equivalent Accumulated as at 31 December 2017 20,679,934 455,849,132,370 Increase during the year 0 Withdrawal Application No DAB012 2,407,400 54,135,203,800 NS Withdrawal Application No DAB013 1,085,000 24,607,800,000 Total fund received for the year cH ended 31 December 2018 3,492,400 78,743,003,800 Accumulated as at 31 December 2018 24,172,334 534,592,136,170 7.2 Reconciliation of contribution from IDA For the year ended 31 December 2018 Cumulative to 31 December 2018 USD VND equivalent USD VND equivalent Contribution from IDA 3,492,400.00 78,743,003,800 24,172,333.87 634,592,136,170 In which: Contribution from IDA received through designated account 3,492,400.00 78,743,003,800 24,172,333.87 534,592,136,170 Contribution from IDA according to Statement of withdrawals 3,492,400.00 78,743,003,800 24,172,333.87 534,592,136,170 U U U U U U U 18 Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') NOTE TO THE FINANCIAL STATEMENTS (continued) as at 31 December 2018 and for the year then ended 8. CONTRIBUTION FROM THE GOVERNMENT OF VIETNAM (COUNTERPART FUND) Currency: VND For the year ended 31 December 2018 Cumulative to 31 December 2018 Fund from Fund from Fund from Central Provincial state Fund from Central Provincial state state budget budget Total state budget budget Total CPMU 1,105,775,265 - 1,105,775,265 7,185,040,662 - 7,185,040,662 Ha Giang PPMU - 991,063,100 991,063,100 - 5,187,598,100 5,187,598,100 Lam Dong PPMU - 520,690,050 520,690,050 - 2,665,888,629 2,665,888,629 Tra Vinh PPMU - 523,194,432 523,194,432 - 1,928,075,521 1,928,075,521 Quang Nam PPMU - 661,007,000 661,007,000 - 2,580,093,000 2,580,093,000 TOTAL 1,105,775,265 2,695,954,582 3,801,729,847 7,185,040,662 12,361,655,250 19,546,695,912 19 M)f .MENEM..E..EE..E . ..EE*EM n OMENONE U Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') NOTE TO THE FINANCIAL STATEMENTS (continued) as at 31 December 2018 and for the year then ended 9. EXPENDITURE 9.1. Expenditure by categories and sources of funds Currency: VND For the year ended 31 December 2018 Cumulative to 31 December 2018 Counter part IDA fund Counter part fund Other fund Total IDA fund fund IDA fund Total Part 1: Strengthening the Social Assistance and Poverty Reduction System 65,871,963,478 - - 65,871,963,478 391,047,971,427 - - 391,047,971,427 In which: Expenses for building an integrated management information system MIS1 and buying hardware for 59 provinces 26,918,336,150 - - 26,918,336,150 79,339,142,850 - - 79,339,142,850 Part 2: Launching a Consolidated Social Assistance Program 17,626,827,943 - - 17,626,827,943 86,445,008,903 - - 86,445,008,903 Part 2.2: Provision of service fees to the VNPOST of the Project Provinces for the purpose of implementing the Transfers, including the Benefits Transfers 17,626,827,943 - - 17,626,827,943 86,445,008,903 - - 86,445,008,903 Part 3: Project Management 7,908,304,499 4,392,125,055 30,080,010 12,330,509,564 47,066,617,553 19,546,695,912 121,798,459 66,735,111,924 TOTAL 91,407,095,920 4,392,125,055 30,080,010 95,829,300,985 524,559,597,883 19,546,696,912 121,798,459 544,228,092,254 20 NeUEEEEINEEEEEEEEEa E E g g M g M a EEE.. Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') NOTE TO THE FINANCIAL STATEMENTS (continued) as at 31 December 2018 and for the year then ended 9. EXPENDITURE (continued) 9.2. Actual expenditure and budget comparison Currency: VND For the year ended 31 December 2018 Cumulative to 31 December 2018 Actual Disbursement Actual Disbursement expenditure Approved budget Variance rate (%) expenditure Approved budget Variance rate (%) Part 1: Strengthening the Social Assistance and Poverty Reduction System 65,871,963,478 135,186,000,000 (69,314,036,522) 49% 391,047,971,427 703,158,000,000 (312,110,028,573) 56% In which: Expenses for building an integrated management information system MIS1 and buying hardware for 59 provinces 26,918,336,150 50,550,000,000 (23,631,663,850) 53% 79,339,142,850 127,530,000,000 (48,190,857,150) 62% Part 2: Launching a Consolidated Social Assistance Program 17,626,827,943 18,000,000,000 (373,172,057) 98% 86,445,008,903 123,180,000,000 (36,734,991,097) 70% Part 2.2: Provision of service fees to the VNPOST of the Project Provinces for the purpose of implementing the Transfers, including the Benefits Transfers 17,626,827,943 18,000,000,000 (373,172,057) 98% 86,445,008,903 123,180,000,000 (36,734,991,097) 70% Part 3: Project Management 12,330,509,564 20,144,000,000 (7,813,490,436) 61% 66,735,111,924 97,124,000,000 (30,388,888,076) 69% TONG CONG 95,829,300,985 173,330,000,000 (77,500,699,015) 55% 544,228,092,254 923,462,000,000 (379,233,907,746) 59% 21 U Social Assistance System Strengthening Project Under the Financing Agreement for Credit No. IDA 5354 - VN between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA') NOTE TO THE FINANCIAL STATEMENTS (continued) as at 31 December 2018 and for the year then ended 10. COMMITMENTS As at 31 December 2018, Project has commitment in relation to service contracts with the amount of VND 18.4 billion (as at 31 December 2017: VND 84.4 bittion). Pham Quang Hau Nguyen Thi Sen Dang Kim Chung Preparer Chief Accountant Project Director Hanoi, Vietnam 28 June 2019 2 U U M U U W U U U U U U U 22 U Emst & Young Vietnam Limited Teli -84 24 3831 5100 8th Floor CornerStone Bulding ax:+84 24 3831 5090 16 Phan Chu Trinh Street ey.com Building a better Hioa R . of en am working world irS.oVEr Reference: 61430372/20994843 - Compliance INDEPENDENT ASSURANCE REPORT ON COMPLIANCE To: Central Project Management Unit - Social Assistance System Strengthening Project We have examined the compliance of the Project management of the Social Assistance System Strengthening Project ("the Project") including Central Project Management Unit ("CPMU"), Project Management Unit of Ha Giang province ('Ha Giang PPMU"), Project Management Unit of Lam Dong province ("Lam Dong PPMU"), Project Management Unit of Quang Nam province ("Quang Nam PPMU"), Project Management Unit of Tra Vinh province, ("Tra Vinh PPMU") (also referred to as "4 PPMUs") with the applicable laws, regulations, procurement procedures and other provisions of the Financing Agreement between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA") (the "Financing Agreement") for the year ended 31 December 2018. CPMU and 4 PPMUs are responsible for the compliance with the Financing Agreement, the Project Operation Manual ("POM"), other laws and regulations applicable to the Project (collectively referred to as "the Project's regulations"). Auditor's responsibility Our responsibility is to express an opinion, based on our examination, on the compliance of CPMU and 4 PPMUs with the Project's regulations that could have a direct and material financial effect to the financial statements of the Project during the year ended 31 December 2018. We conducted our examination in accordance with the principles of International Standard on Assurance Engagements 3000 - "Assurance Engagements other than Audits or Reviews of Historical Financial Information" ("ISAE 3000") insofar this standard could be usefully applied in this examination and in its specific compliance context. This standard requires that we comply with ethical requirements and that we plan and perform the examination to obtain reasonable assurance about whether CPMU and 4 PPMUs comply with the Project's regulations that could have a direct and material financial effect to the financial statements. Our examination included obtaining a sufficient understanding of the Project and the Project's regulations; assessing the risk on non-compliance exists that could have a direct and material financial effect to the financial statements of the Project; testing and evaluating, on a sample basis, the compliance of CPMU and 4 PPMUs with the Project's regulations based on the assessed risk; and performing such other procedures as we considered necessary in the circumstances. We considered the following criteria in evaluating the compliance of CPMU and 4 PPMUs with the Project's regulations: CPMU and 4 PPMUs' awareness of the Project's regulations the implementation of the Project's regulations by CPMU and 4 PPMUs; the significance to the financial statements where CPMU and 4 PPMUs fail to comply with one requirement or several requirements in the Project's regulations, if any; and that a weakness or a deficiency existed where CPMU and 4 PPMUs fail to comply with one or several requirements in the Project's regulations that could have a direct and material financial effect to the financial statements. We believe that our examination provides a reasonable basis for our opinion. 2 23 Building a better working world * Opinion In our opinion, the Project management comply, in all material respects, with the Project's regulations U that could have a direct and material financial effect to the financial statements of the Project for the year ended 31 December 2018 based on the evaluating criteria above. Other Matters We draw attention to Appendix 1 - Management letter in which we discussed minor departures from the Project's regulations which have no direct and material financial effect to the financial statements of the Project but may put the Project's objectives at risk. This examination involved a historic evaluation of the compliance of the Project management with the Project's regulations at a specific point in time. Thus, this examination does not provide assurance for future periods due to the risk of changes in the Project's regulations, or that the degree of compliance with the Project's regulations may deteriorate. For and on behalf of Ernst & Young Vietnam Limited Nguyen Thai Thanh Deputy General Director Audit Practising Registration Certificate No. 0402-2018-004-1 Hanoi, Vietnam 28 June 2019 24 Erst & Young Vietnam Limited el: +84 24 3831 5100 8th Floor, Cor nerStone Burding Fax: 84 24 3831 5090 16 Phan Chu Trinh Street ey.com Hoan Kiem District Building a better Hanoi, S.R. of Vietnam working world Ho R fVe r Reference: 61430372/20994843 - Internal control INDEPENDENT ASSURANCE REPORT ON THE EFFECTIVENESS OF INTERNAL CONTROL To: Central Project Management Unit - Social Assistance System Strengthening Project We have audited the design and operating effectiveness of the internal control of Social Assistance System Strengthening Project ("the Project") as operated by the management of the Project including Central Project Management Unit ("CPMU"); Project Management Unit of Ha Giang province ("Ha Giang PPMU"); Project Management Unit of Lam Dong province ("Lam Dong PPMU"); Project Management Unit of Quang Nam province ("Quang Nam PPMU"); Project Management Unit of Tra Vinh province ("Tra Vinh PPMU") (also referred to as "4 PPMUs") which existed during the year ended 31 December 2018. The internal control was set up for the purpose of managing risks no achievement of the Project's objectives, including the reasonable prevention and detection of errors, irregularities and fraud. The internal control is the responsibility of the Project management. Auditor's Responsibility Our responsibility is to express an opinion, based on our audit, on the effectiveness of the internal control that could have a direct and material financial effect to the financial statements of the Project for the year ended 31 December 2018. We conducted our audit in accordance with the principles of International Standard on Assurance Engagements 3000 - Assurance Engagements other than Audits or Reviews of Historical Financial Information ("ISAE 3000") insofar this standard could be usefully applied in this audit and in its specific compliance context. This standard requires that we comply with ethical requirements and that we plan and perform the audit to obtain reasonable assurance about whether the internal control for the Project is adequately designed for the purpose of the Project and was operating effectively during the period covered by the audit. Our audit included obtaining a sufficient understanding of the Project, and the internal control for the Project; assessing the risk that a material weakness exists that could have a direct and material financial effect to the financial statements of the Project; testing and evaluating, on a sample basis, the design and operating effectiveness of internal control based on the assessed risk; and performing such other procedures as we considered necessary in the circumstances. We considered the following criteria in evaluating the effectiveness of the internal control: the requirement for design and implementation of the internal control in the Project Operation Manual ("POM"); the appropriateness of the internal control for the Project's activities and objectives; the implementation of the internal control by the Project management to achieve its objective of prevention and detection of errors, irregularities and fraud that could have a direct and material financial effect to the financial statements of the Project the significance to the financial statements where one control or several controls did not operate as designed, if any; and that a weakness or a deficiency existed where a control or several controls did not reasonably prevent or detect risks that could have an adverse impact on the objectives of those internal controls which are to provide reasonable assurance that the financial statements are prepared, in all material respects, in accordance with the adopted accounting policies and POM, that the funds are utilised for the purposes defined in the Financing Agreement between the Government of the Socialist Republic of Vietnam and the International Development Association ("IDA") ("the Financing Agreement") and that the Project complies with the Financing Agreement, POM and other applicable laws and regulations. We believe that our audit provides a reasonable basis for our opinion. U 25 * ~ A W Building a better working word Opinion In our opinion, the Project's internal control which existed in CPMU and 4 PPMUs during the year ended 31 December 2018, in all material respects, was adequately designed for the purpose of the Project and operated in an effective manner, based on the evaluating criteria above. Other Matters We draw attention to Appendix 1 - Management letter in which we discussed findings from the internal control which have no direct and material financial effect to the financial statements of the Project but may put the effectiveness of Project's internal control at risk. This audit involved a historic evaluation of the internal control at a specific point in time. Thus, this audit does not provide assurance for future periods due to the risk that internal control may become inappropriate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate. U For and on behalf of Ernst & Young Vietnam Limited Nguyen Tha Thanh Deputy General Director Audit Practising Registration Certificate No. 0402-2018-004-1 Hanoi, Vietnam 28 June 2019 2 U U U U U U U 26