mh Mahfel Huq & Co. Estd. 1974 INDEPENDENT AUDITOR'S REPORT AND AUDITED FINANCIAL STATEMENTS As at and for the year ended 30 June 2024 YEARS Sustainable Microenterprise and Resilient Transformation (SMART) Project Implemented By: Palli Karma-Sahayak Foundation (PKSF) INDEPENDENT AUDITOR'S REPORT AND AUDITED FINANCIAL STATEMENTS As at and for the year ended 30 June 2024 MAHFEL HUQ & CO. CHARTERED ACCOUNTANTS BGIC Tower (4h Floor), 34 Topkhana Road, Dhaka-1000 Phone: 02-223351948, 223383143 E-mail: asarkar@mahfelhuq.com Web: www.mahfelhuq.com TABLE OF CONTENTS PAGE SL. NO. PARTICULARS NO. NO. 01 Independent Auditor's Report 1-3 02 Statement of Financial Position 4 03 Statement of Profit or Loss 5 04 Statement of Changes in Equity 6 05 Statement of Cash Flows 7 06 Notes to the Financial Statements 8-12 36IC Tov (4th loor) h Mahfel Huq & Co. Da1 a adesh CHARTER[D ACCOUNTANTS Iel: +88-02-223351948. 223383143 Estdr19741Fax: +88-02-957100 The first registered accointing firim in ndependent Bangladesh F-im: 4 8,3nfo@e com _A ,F-Web6: www10 mal'hccom 9 NTiRNATONM An independent nieiher firm of AGN International wey WvVWIahf1hLIqCol) INTERNATIONAL Independent Auditor's Report To the General Body of Palli Karma-Sahayak Foundation (PKSF) Report on the Audit of the Financial Statements Opinion We have audited the financial statements of Sustainable Microenterprise and Resilient Transformation (SMART) (the Project), Implemented by: Palli Karma-Sahayak Foundation (PKSF) which comprise the statement of financial position as at 30 June 2024, and the Statement of Profit or Loss, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Project as at 30 June 2024, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs). Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). 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), and we have fulfilled our ethical responsibilities in accordance with the IESBA Code and the Institute of Chartered Accountants of Bangladesh (ICAB) Bye Laws. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation of financial statements that give a true and fair view in accordance with IFRSs and other applicable laws and regulations and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Project's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Project or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Project's financial reporting process. 1 Mahle I ILI & Co. is an independent nerief firm of AGN International, UK. AGN Inteinational is a workwide assoc alien of separate and; ndependent aCCun1tI1g & coilSUlli1g firms Eachi nmmbor of AGN opeiatOs under its own local or nlonal niame and rei nS antonomrlouts. BG GIC owe r (-Ith Floor) 341. ie-pkhnra l(ear mhl Mahfel Huq & Co. Dhk-10 Llqaesh 1ARTERLD ACCOUNTANTS Tel. 88-02-223351948, 223383143 Estd.1974 ax: +88 02-9571005 SThe first registered accounting firm in independent Bangladesh -al: 1 nf0o f lhuq com 9gn Ai independent miiiber firm ofAGN International 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 ISAs 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 the audit in accordance with ISAs, we exercise professional judgement 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. * Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt o the Project's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Project to cease to continue as a going concern. * 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 gives a true and fair view. * Obtain sufficient appropriate audit evidence regarding the financial information of the project to express an opinion on the financial statements as well as assist in forming an opinion on the Palli Karma-Sahayak Foundation (PKSF) as a whole in which data verification code will be provided. We are responsible for the direction, supervision, and performance of the audit. We remain solely responsible for our audit opinion. 2 Male I lq & Co is in idependent member firm ot AGN titernatoirol, UK AGN Intercational is a worldwlde assoclation of separate anid S andependent accounting & consulting firms acih mitember of AGN aperales ndr its own ocal or national namne and remais autorIomoS. FG4c ToweO (4th Floor) KRaL nI .., 9 4 k A 111a Road h Mahfel Huq & Co. -l 000,nlahdsh (HART RID ACCOMUNTANTS I +88 02-223351948, 223383143 Estd. 1974 Fav 88 02-9571005 h lie first registered accounting firm in Independent Bangladesh E info@mahfelhuq.corn Web: www mahfelhug.conm ag~nA(IO llAn independent member firm of AGN International INTERNAT,ONAL We commu1nicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance 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. Md. Abdus Satter Sarkar, FCA Partner ICAB Enrolment No: 1522 Mahfel Huq & Co. Place: Dhaka, Bangladesh Chartered Accountants Date: II December 2024 Firm Registration No. P-46323 3 Maihf([ I LII & CO iIII n 1 ineondent memirber firm of AGN InterrOeronal UK. AGN Intornational is a worldwide association of separato anl fls indep''enldnt {(ccounting & consulting firms Fach member of AGN erates ider its own local or natiorl name anid ic nir s autonomous . t.ne Sustainable Microenterprise and Resilient Transformation (SMART) Project Implemented by: Palli Karma-Sahayak Foundation (PKSF) Statement of Financial Position As at 30 June 2024 Pr a Amount in Taka Particu larsa30 June 2024 ASSETS Current assets Cash and cash equivalent 3.00 737,265,390 Total current assets 737,265,390 TOTAL ASSETS 737,265,390 CAPITAL AND LIABILITIES Capital fund and reserve Capital find and reserve 4.00 Total Capital fund and reserve Current liabilities Advance Received from IDA 5.00 726,637,224 Current account with PKSF 6.00 6,505,860 Other liabilities 7.00 4,122,306 Total current liabilities 737,265,390 TOTAL CAPITAL AND LIABILITIES 737,265,390 The annexed notes from I to 13 form an integral part of these financial statements. c 36. Md. Mashiar Rahman Md. Fazlul hader Deputy Managing Director Managing Director Signed in terms of our separate report annexed. Md. Abdus Satter Sarkar, FCA Partner ICAB Enrolment No. 1522 Mahfel Huq & Co. Place: Dhaka, Bangladesh Chartered Accountants Dated: II December 2024 Firm Registration No. P-46323 4 N Sustainable Microenterprise and Resilient Transformation (SMART) Project Implemented by: Paill Karma-Sahayak Foundation (PKSF) Statement of Profit or Loss For the year ended 30 June 2024 Particulars Amount in Ta 30 June 2024 INCOME Operating income Grant income 8.00 52,576,992 TOTAL INCOME 52,576,992 EXPENDITURE Manpower compensation (Salaries, allowances & others) 9.00 35,670,065 Institutional development and capacity building 10.00 1,553,959 Communications, Monitoring and Evaluation 11.00 267,416 Administrative expenses 12.00 15,085,552 TOTAL EXPENDITURE 52,576,992 Excess/(shortage) of income over expenditure . The annexed notes from I to 13 form an integral part of these financial statements. Md. Mashiar Rahman Md. Fazlul Kader Deputy Managing Director Managing Director Signed in terms of our separate report annexed. Md. Abdus Satter Sarkar, FCA Partner ICAB Enrolment No. 1522 Mahfel Huq & Co. Place: Dhaka, Bangladesh Chartered Accountants Dated: II December 2024 Firm Registration No. P-46323 5 Sustainable Microenterprise and Resilient Transformation (SMART) Project Implemented by: Paul Karma-Sahayak Foundation (PKSF) Statement of Changes in Equity For the year ended 30 June 2024 Amount in Taka Particulars RetainedGrants Total Earnings Balance as at 01 July 2023 Excess of income over expenditure during the year - - Balance as at 30 June 2024 The annexed notes from I to 13 form an integral part of these financial statements. Md. Mashiar Rahian Md. Fazful Kader Deputy Managing Director Managing Director Signed in terms of our separate report annexed. Md. Abdus atter Sarkar, FCA Partner ICAB Enrolment No. 1522 Mahfel Huq & Co. Place: Dhaka, Bangladesh Chartered Accountants Dated: II December 2024 Firm Registration No. P-46323 6 6/ p N Sustainable Microenterprise and Resilient Transformation (SMART) Project Implemented by: Palli Karma-Sahaynk Foundation (PKSF) Statement of Cash Flows For the year ended 30 June 2024 Particulars Amount in Taka 30 June 2024 A. Cash flows from operating activities Excess/(shortage) of income over expenditure - Surplus changes in operating activities - Changes in operating activities increase/(Decrease) in current account with PKSF 6,505,860 Increase/(Decrease) in others liabilities 4,122,306 10,628,166 Net cash inflows/(outflows) from operating activities 10,628,166 B. Cash flows from investing activities Addition of fixed assets Sales of Fixed Assets Net cash inflows/ (outflows) from investing activities C. Cash flows from financing activities Increase/(Decrease) in advance received from IDA 726,637,224 Net cash inflows/(outflows) from financing activities 726,637,224 Net increase/(Decrease) in cash and cash equivalents 737,265,390 Add: Opening cash and cash equivalents Closing cash and cash equivalents 737,265,390 The annexed notes from I to 13 form an integral part of these financial statements. Md. Mashiar Rahman Md. FazulKader Deputy Managing Director Managing Director Signed in terms of our separate report annexed. Place: Dhaka, Bangladesh Dated: II December 2024 7 Sustainable Microenterprise and Resilient Transformation (SMART) Project Implemented by: Palli Karma-Sahayak Foundation (PKSF) Notes to the Financial Statements As at and For the year ended 30 June 2024 1.00 Background 1.01 PKSF The Palli Karma-Sahayak Foundation (PKSF), an apex development organization established by the Government of Bangladesh (GoB) in May 1990, is mandated for poverty alleviation through sustainable employment generation by providing appropriate financing, skill training, and other necessary services. Legally, PKSF is a "company not for profit" and is registered under the Companies Act of 1913/1994 with the registrar of Joint Stock Companies. The legal structure of PKSF allows flexibility and authority to undertake programmes in a dynamic environment, implementing them throughout the country and manage its affairs as an independent organisation. The major objectives of PKSF are to: As a second-tier organization, PKSF implements all programs and projects through its Partner Organizations (POs) across the country. At present, PKSF has more than 200 active POs all over the country. PKSF launched its Micro-Enterprise program in 2001 to extend financial services to the progressive clients of its Partner Organizations (POs) for undertaking Micro- Enterprises. This program termed 'Agrosor' is being implemented all over Bangladesh through the POs of PKSF. The aim of the program is to extend its financial services to the progressive members of other programs for undertaking economic activities that require bigger amount of find. To strengthen environmentally sound microenterprise development, PKSF is now implementing several projects that are supported by development agencies (i.e., IFAD, World Bank, and Asian Development Bank (ADB)). The Sustainable Enterprise Project (SEP), a World Bank-funded project, focuses on the adoption of environmentally sustainable practices by targeted nicroenterprises. Building on the success and lessons learned from the SEP Project, the PKSF and the World Bank, with the help of the Bangladesh government, has taken an initiative to implement the 'Sustainable Microenterprise and Resilient Transformation (SMART) Project'. The Registered Office of PKSF is situated at "PKSF Bhaban", Plot: E-4/B, Agargaon Administrative Area, Sher-e-Bangla Nagar, Dhaka- 1207, Bangladesh. 1.02 Sustainable Microenterprise and Resilient Transformation (SMART) Project: The "Sustainable Microenterprise and Resilient Transformation (SMART)" project is co- financed by the World Bank and PKSF, and the project will support 80,000 microenterprises (MEs) in the agribusiness, manufacturing, and service sectors. The SMART project will foster a green growth approach that abates environmental damage, secures sustainable growth engines through the adoption of green RECP practices and technologies, creates new job opportunities, foster climate resiliency, and achieves harmony between the economy and the environment. The project consists of three components: (1) Component-01: Enabling capacity and systems for green growth of MEs, (2) Component-02: Providing Access to Finance for MEs to enable Green Growth, and (3) Component-03: Improving PKSF Project Management, Communications, Monitoring, and Evaluations, and Knowledge Management. Total budget of USD 300.00 million out of which the World Bank contribution is USD 250.00 million and PKSF contribution is USD 50.00 million. 8 Mil 1.03 Objectives of SMART The Project Development Objective (PDO) is 'to increase resource-efficient and resilient green growth of microenterprises.' The long-term objective of the project is to promote a transformation of the microenterprise sector into a more dynamic, lower-polluting, resource- efficient, and clirmate-resilient microenterprise sector. 2.00 Significant accounting policies 2.01 Basis of accounting The Sustainable Microenterprise and Resilient Transformation (SMART) Project's financial statements have been prepared under the historical cost convention on a going concern basis using the International Financial Reporting Standards (IFRS) and International Accounting Standards ([AS) as adopted in Bnagladesh. Palli Karma-Sahayak Foundation (PKSF) generally follows the accrual basis of accounting or a modified form thereof for key income and expenditure items. The significant accounting policies followed in the preparation and presentation of these financial statements are summarised below: 2.02 Other income All other income are recognized when the right to receive such income has been reasonably determined and all conditions precedent are satisfied. 2.03 Reporting Period These financial statements covered the year from 01 July 2023 to 30 June 2024. 2.04 Property, plant and equipment Particulars Rate of Depreciation Computers, Printers, and UPS 20% Office Equipment 20% Telephone 20% Furniture 10% Training Equipment 20% System & Software 25% 2.05 Loan loss provision The loan loss provision policy of the PKSF is as under: Classification Status Days outstanding Rate of LLP Standard (Other than agriculture) Nil 2% Standard (Agriculture) Nil 5% Watch list (Other than agriculture) 01-60 days 10% Watch list (Agriculture) 01-60 days 15% Substandard (Other than agriculture) 61-180 days 50% Substandard (Agriculture) 61-180 days 60% Doubtful (All) 181-365 days 80% Bad (All) Over 365 days 100% The loan loss provision policy is however applicable to loans only. 2.06 General The financial statements have been prepared in Bangladeshi currency (Taka) and figures have been rounded off to the nearest integer. 9 Amount in Taka Particulars 30 June 2024 3.00 Cash and cash equivalent Cash at bank (i) Sonali Bank PLC. Agargaon Br, SND-4440403000089 (CONTASA) 7,265,390 (ii) Southeast Bank PLC. Agargaon Br. SND-002013100000364 Closing balance 737,265,390 4.00 Capital fund and reserve Opening balance Excess of income over expenditure during the year Closing balance 5.00 Advance Received from IDA Opening balance Add: Advance Received during the year 5.01 770,000,000 770,000,000 Less: Transfer to loan for project - Less: Transfer to deferred income (Grant for asset) Less: Transfer to grant income 43,362,776 43,362,776 Closing balance 726,637,224 5.01 Schedule of Fund Received from IDA: Received Date Fund Received Reference No. Value DateF:20304 I FY: 2023-2024 PKSF-SMART-01 28/3/2024 03/04/2024 110,000,000 PKSF-SMART-02 10/6/2024 12/06/2024 660,000,000 Total 770,000,000 6.00 Current account with PKSF This represents the balance in current account maintained with PKSF as at 30 June 2024 6,505,860 6,505,860 7.00 Other liabilities Liabillity for other finance 7.01 2,383,732 Liabillity for administrative expenses 7.02 196,434 Liability for Monitoring & evaluation and communication 7.03 213,890 Liability for knowledge management 7.04 1,328,250 Total 4,122,306 7.01 Liabillity for other finance IT deducted at source 1,156 VAT deducted at source 1,733 Liability for bank interest 2,380,843 Total 2,383,732 7.02 Liabillity for administrative expenses Recruitment expenses (including Advertisement) 188634 Printing and Stationary 7,800 Total 196,434 10 7.03 Liability for Monitoring & evaluation and communication Travel to POs and MEs 13,890 External audit fees 200,000 Total 213,890 7.04 Liability for knowledge management Situational Analysis 1,328,250 Total 1,328,250 8.00 Grant income Grant Income from IDA 43,362,776 Grant Income from PKSF 9,214,216 Total 52,576,992 9.00 Manpower compensation (Salaries, allowances & others) World bank contribution 9.01 28,470,065 PKSF contribution 9.02 7,200,000 Total 35,670,065 9.01 World bank contribution Project Coordinator 4,295,689 Deputy Project Co-ordinator-1 1,572,365 Deputy Project Co-ordinator-II 1,394,551 Assistant Project Coordinator-I 1,313,122 Assistant Project Coordinator-lI 920,840 Procurement Specialist 1,510,645 Financial Management Specialist (FMS) 1,107,806 Senior Program Manager (Gender & Social Management) 819,290 Senior Program Manager (Monitoring, Evaluation & MIS) 906,387 Senior Program Manager (Enterprise Development-Livestock) 906,387 Senior Program Manager (Enterprise Development-Agriculture) 906,387 Senior Program Manager (Enterprise Development-Aquaculture) 906,387 Senior Program Manager (Enterprise Development-Footwear & Leather) 906,387 Senior Program Manager (Enterprise Development-Light Engineering) 906,387 Senior Program Manager (Enterprise Development-Food Processing) 906,387 Program Manager (Environment & Natural Resources Management)-I 805,677 Program Manager (Environment & Natural Resources Management)-1I 805,677 Program Manager (Administration & Procurement) 724,523 Program Manager (Accounts & Finance)-l 645,677 Program Manager (Accounts & Finance)-II 805,677 Program Manager (Communication & Knowledge Management) 805,677 Program Manager (GIS & lOT Traceability) 234,667 Program Manager (Engineering & Design) 805,677 Program Manager (Training & Capacity Development) 805,677 Program Manager (Enterprise Development -Agriculture) 234,667 Program Manager (Enterprise Development -Textile and Fashion)-1 234,667 Program Manager (Enterprise Development -Textile and Fashion)-II 197,333 Assistant Program Manager (Monitoring & Evaluation -Data Management) 44,000 Assistant Program Manager (Training & Capacity Development) 226,452 Support Staff-I 605,000 Support Staff-lI 605,000 Support Staff-IlI 605,000 Total 28,470,065 11 ,v 9.02 PKSF contribution Supervisory Officer's 2,400,000 Operations Concern Offcer 4,80001 Total 7,200,000 10.00 Institutional development and capacity building Capacity Building 10.01 225,709 Knowledge Management 10.02 1,328250 Total 1553,959 10.01 Capacity building Workshop & Seminar 225,709 Total 225,709 10.02 Knowledge Management Situational Analysis 1,328,250 Total 1,328,250 11.00 Communications, Monitoring and Evaluation Travel to POs and MEs 67,416 External audit fees L 200,000 Total 267,416 12.00 Administrative expenses World bank contribution 12.01 13,071,336 PKSF contribution 12.02 2,014,216 Total 15,085,552 12.01 World bank contribution Office Rent 4,116,960 Utility 682,632 Recruitment expenses (including Advertisement) 872,543 Procurement expenses (including Advertisement) 621,078 Vehicle Rent 6,000,000 Printing and Stationary 319,280 Internet & phone bill 105,822 Meeting costs 147,710 Other cost (Insurance cost, Bank Charge, Others etc.) 205,311 Total 13,071,336 12.02 PKSF contribution Meeting costs 121,444 Overhead cost 1,892,772 Total 2,014,216 13.00 Subsequent event No circumstances have arisen since the statement of financial position date, which would require adjustments to or disclosure in the financial statements or notes thereto. 12