Financial Attest Audit Report on the Accounts of Sindh Water and Agriculture Transformation Project (SWAT) IDA Loan Nos.7254-PK & 7255-PK Agriculture, Supply & Prices Department, Government of Sindh For the Financial Year 2023-24 AUDITOR-GENERAL OF PAKISTAN SERVING THE NATION BY PROMOTING ACCOUNTABILITY, TRANSPARENCY AND GOOD GOVERNANCE IN THE MANAGEMENT AND USE OF PUBLIC RESOURCES FOR THE CITIZENS OF PAKISTAN ... TABLE OF CONTENTS Page No. Abbreviations & Acronyms II Preface IV PART-I Project Overview 04 Auditor's Report to the Management (Audit Opinion) 06 Financial Statements 07 PART-II MANAGEMENT LETTER 22 EXECUTIVE SUMMARY 26 I. Introduction 28 2. Audit objectives 30 3. Audit scope and methodology 30 4. AUDIT FINDINGS AND RECOMMENDATIONS 30 4.1 Organization and Management 30 4.2 Financial Management 36 4.3 Procurement and Contract Management 40 4.4 Asset Management 42 4.5 Sustainability 43 4.6 Overall Assessment 43 5. Conclusion and Recommendations 46 PART- III Follow up of prior audit recommendations 50 ACKNOWLEDGMENT 52 ANNEXURES 53 Abbreviations & Acronyms AGP Auditor-General of Pakistan ECNEC Executive Committee of the National Economic Council FAM Financial Audit Manual F.Y Financial Year GFR General Financial Rule GoS Government ofSindh IBRD International Bank for Reconstruction and Development INTOSAI International Organization of Supreme Audit Institutions IPSAS International Public Sector Accounting Standards ISSAis International Standards of Supreme Audit Institutions M&E Monitoring & Evaluation NOC No Objection Certificate OM Observation Memo PAD Project Appraisal Document PC-I Planning Commission Proforma I PC-II Planning Commission Proforma II PD Project Director PKR Pakistan Rupees SWAT Sindh Water and Agriculture Transformation Project us United States of America WB World Bank ii ,- PREF ACE The Auditor-General of Pakistan conducts audit in terms of Articles 169 and 170(2) of the Constitution of the Islamic Republic of Pakistan 1973, read with Sections 8 and 12 of the Auditor-General's (Functions, Powers and Terms and Conditions of Service) Ordinance 200 I. The audit of Sindh Water and Agriculture Transformation Project (SWAT) funded by IDA Loan No.7254-PK and 7255-PK for the financial year 2023-24 was carried out accordingly. The Directorate General Audit Sindh Karachi conducted audit of the Sindh Water and Agriculture Transformation Project, Agriculture, Supply and Prices Department, Government of Sindh funded by IDA loan No.7254-PK and 7255-PK during September, 2024 for the Financial Year 2023-24 with a view to report significant findings to stakeholders. Audit examined the economy, efficiency, and effectiveness aspects of the Sindh Water and Agriculture Transformation Project. In addition, Audit also assessed, on test check basis whether the management complied with applicable laws, rules and regulations in managing the project. The Audit Report indicates specific actions that, if taken, will help the management to realize the objectives of the project. The audit observations included in this report have been finalized in the light of discussion with project authorities in exit meeting. The Report consists of three parts. Part-I contains Project Overview, Auditor's Report (Audit Opinion) and Financial Statements. Part-II contains Management Letter, Executive Summary, Audit Findings, Conclusion and Recommendations. Part-III contains Follow-up of Prior Audit Recommendations, Acknowledgement and Annexures. The Audit Report has been prepared for submission to the World Bank in terms of Loan Agreements, IDA Loan No.7254-PK and 7255-PK. (Kamran A • ashmi) Director General Dated:O5'--/ ~ •-2024 Place: Karachi iv 1 PART-I I. Project Overview 2. Auditor's Report to the Management 3. Financial Statements 2 3 PROJECT OVERVIEW Project Title: Sindh Water and Agriculture Transformation Project (SWAT) i) Irrigation Department, Government ofSindh Sponsoring Authority: ii) Agriculture. Supply & Prices Department, Government of Sindh i) Irrigation Department. Government of Sindh ii) Agriculture, Supply & Prices Department, Government ofSindh Executing Agency: The streamlining coordination and monitoring in execution will be committed by Project Coordination & Monitoring Unit (PCMU) P & D Department, Government of Sindh i) Sindh Irrigation & Drainage Authority (SIDA), Irrigation Department, Government ofSindh ii) Agriculture Delivery Unit (ADU/PMU). Agriculture. Supply & Pries Implementing Agency: Department, Government of Sindh iii) Project Coordination & Monitoring Unit (PCMU). P&D Department. Government ofSindh Loan Numbers: IDA Loan No.7254-PK and 7255-PK PC-I Cost: FPA: $292, GoS: $28 Total Cost $320.00 Million (Rs 70,44595 Million) Date of Commencement: January 2023 Date of Completion (as per PC-I): December 2028 Date of Approval by ECNEC: 61h December, 2022 Loan Closing Date: 10th June, 2028 Loan Utilization Status up to F.Y 2022- Rs 8,970.384 Million 23 Expenditure for the F.Y 2023-24 Rs I 0,400.811 Million Progressive Expenditure up to F.Y Rs 19,371.165 Million 2023-24 4 AUDITOR'S REPORT The Project Director, Sindh Water and Agriculture Transformation Project (SWAT), Bungalow No. 144, Defense Officers Housing Society (OOHS) Phase-I, near Defense Park, Hyderabad. Auditor's Report to the Management We have audited the financial statements of Sindh Water and Agriculture Transformation Project that comprises Statement of Receipts and Payments for the Period from 1st July 2023 to 30th June, 2024. Management Responsibility: It is the responsibility of project management to establish and maintain a system of internal controls, prepare and present the Statement of Receipts and Payments in conformity with the requirements of Cash Basis IPSAS, Financial Reporting under the Cash Basis of Accounting Standards. Auditor's Responsibility: The responsibility of the auditor is to express an opinion on the financial statements based on the audit conducted. We conducted our audit in accordance with the International Standards of Supreme Audit Institutions. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. The audit process includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. It also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion: a) The financial statements present fairly, in all material respects, the cash receipts and payments by the project for the year ended 30th June, 2024 in accordance with Cash Basis IPSAS, Financial Reporting under the Cash Basis of Accounting Standards. b) The expenditure has been incurred in accordance with the requirements of legal agreements. Emphasis of Matter: Without qualifying my opm1on, I draw your attention towards some serious discrepancies noticed during the audit. 6 I. Due to non-reconciliation, a variation of Rs 6,576.053 million was identified between bank's closing balance and financial statements which is a matter of concern that might lead to misrepresentation of financial statements. The difference between the figures needs probing to determine its cause. 2. It was observed that the management could not utilize funds of Rs 8,777.928 million available for the purpose of disbursement to the farmers for wheat subsidy. As a result, the intended purpose/targets were not achieved which shows inefficiency on the part of management. Dated: o..f,- 12 -2024 {Kam Place: Karachi Director General 7 ANNUAL PROJECT FINANCIAL STATEMENTS For the Financial Year Ended 30 th June, 2024 8 SfNDII WATER AND AGRICULTURE TRANSFORMATION PROJECT (IDA LOAN# 7254-PAK& 7255-PK) Slalcment of Cash Receipts & Payments 1-'or the year ended ~---~~ June 30 2024 .. ·--""'- ·- --···, ----·-'"-' '· 2022-2.l lOlJ-24 Cumulalln •~· ~ l'litfflU1 ltudpliChttM•ll} / ,,. "' ""'"""'"' lttttlph(rll)IMlllh} Cn1"'"'411!' n1n1 ,.,.,.. ( -..1nUrd hy flJ1J}tft 1••n1 ,,.,1,<1 L~~ (rKlt} _ (~KR) (PKR) _JPKR) _ (l'KR) - Rt:CFJPTS 11:-.TI.OWS U>A 7"'4-l'K l!ttmadh't fund .. • . I 390.000 llM l 190000000 lloSSl>o:t l,361,.!60,3211 IOA 7254-PK ' 11..141.616,000 . . 154,403.600 . 12.710.176,)20 IDA 7255-l'K ' . lH403.600 I Total Ra!o IJ 17.213,000 )7.21J,[IOO ~ llcliury lmil S..ppon IJ 99,307,109 . 91,.!97,19-1 I92.904..!0J -~~C'amport<'lll 14 IQ,2l4.146,l23 224,20,l,0'/3 IO_<-OlJOMll SccdSubsidy1o .-.... 15 . 8,390,000.l!OO l..!9il.OOOJ)OO - 10,400.Sll,90,I SU,4DJ,791 ~ . 9,17,!J0,1,1196 . l,635,.!60,121 l,'1S.56().U8 . I i c..lootdlo...i1o&..r1Hynr l,5!1J,J~;m l,6JU6/J,/28 . I NdC-otlHIAdol'tlle\',v 16 9-17J14tf911i NOTE: The.....,. Ina .l-1 ◄ form.,. in1 ADU SWAT Project, Hyderabad DL UAQUAT AU BIW'lTO .............. -~-=- PROJECT DlRe".- Pill\'O subprojects. An estimated )4,000 households will rccei~ direct financial benefits from the pilot smart subsidy schemes targeting small and medium-sized farmers. Renovating the Akram Wah canal will benefit appro.'{imately S0,000 farming households by improving Irrigation water supply reliability in the command area. Improvements In AkramWah will also help ensure a reliable raw water supply for towns and cities lhal draw upon the canal, including llyderabad, which hu a popul.ltlon of around 2 million. The FERC will bcnefil around 800,000 farmer households through the provision or cash tnmsfcrs. In addition, the project Indirectly supports all of Sindh provlnce by helping to implement the 2018 Agricultural Policy and lhc forthcoming Slndh Water Policy, which will enhance equitable rural development through agricultural growth and promote IWRM. 14 I / Summary or the Component J: Agriculture Incentive and l11vcs1mcn1s: Table below shows the lJS dollar cquivalcnls of the project costs in the approved PC- I. l.l 14.96 3.l andW!tnl $00.00 60(),00 7'0.00 7$000 IOOOJlO 1'0.00 4)$0.00 19.77 l'rot:ur Amo1ml Convcn FERC2023-0I 15 / J 9: Receipts from IDA (the World Bank t,·inanelng): .! Ollring the financial year 2023-24, withdrawal application for Designated Account advance have bc:en received from the World Dank. Sr. Wilhdntwal Amount Re lrnbhed Remarks # Reference USI> Amount Convenkm mte l'K'!cR~A~mo=u~n~t-+----,--,-----1 2. fb'RC2023-0J -·:«i]oo]oo· 21!3.1154 11.348,616,000 ___(?A Adm1'C__ 10: lntqirated l'O An-• llenlopment (CSA) This subcomponent finances agriculture related investments al 10, such as on-farm water management improvements, the WCA level within the 1 selective use: of high-efficiency irrigation systems {IIEIS), land leveling. on-farm drainage rehabilitation. and training on climate smart agricullurc practices. 2013-24 2022-:U Amount l11 Pait Amount I• Pall Ca111ulatlvc S.,plln amt Co111u1111blcs Ru..-, Ru- l'urclwcd ,d!idcs i, 169 nMJ)O IS.169 000.00 Purchased l'umilun: and fi.iure . snnnnnn.110 5.00O,000JlO Ptm:lwc:d ITEquipmenlS . 5 000.000.00 S.00O.000 00 Rcm--1km and Salaries . 2.2S41100.00 2.254,000.00 Total- . 11.QUMR .. -· ... 11: Acrialltllnt lnfonnatkm a11d TechllOlogy. This component improves agricultural statistics, crop reporting. market information services, and establishes a salinity and water logging research program. 2023-1◄ 1022-lJ Cu,ulllaliYc s.pplln aud C.U.u1111blff A11111uat iu l'■ lt Rupffl A111ouut ill hit Rupees Purd-4 •'Chiclcs SJ,773,300.00 5).111.500.00 htdmed furniture and filgglngand Salinity. 6,98S,440.00 104,&J0,000.00 II I.SIS,-Wl.00 Sun-ey on crop rqx,nlng 1,77' llil.00 0.00 1.775.844.00 Tllhl . .oul f1..1ll'J.t11.00 191--'"'--Ull.00 lU,11,&,.&12.00 12: Agrkulture V1111, Cb•ln l>•nlopmmL This subcomponent helps to enhance !he agriculture value chain for high-value, water-thrifty crops. 11 supports farmer groups and medium-sized agribusinesses lo address infrastrm:ture and technical bottlenecks, with the aim of impro~ing crop productivity and quality, reducing post-harvest losses. and better linking producers and the market. 16 lOlJ-24 10ll-1J supplla aad Cott111111abln An,o11nt la l'ak lb t1 Amount In l'ak Ru ~ vchiclcs J721l,000.0() 37 13 000.00 Tolalamooal J7 I 000.00 37 13 000.00 13: Agticlllture Otllve1Y Unit (ADU). Agriculture Uelivcry Unit (ADU) established by Department or Agriculture, Sllf'PIY &. Prices and Department, will be responsible for 1hc overall project management, moniloring and supervision, as well as liduciiuy and safeguards lmplemcntatlon and compliance 201J-24 1021-lJ Amount ID Pak - Amoualtn Pak Cumvlalh-• Su""lltt a11d CusumablH ll.uoHS l'llldmed ,-cltidH "'""""21,912,309.00 21,912,309.00 l'lltdlLw rumiture and n,ture 8,599,400.00 6,041,377.00 14,640,777.00 47,225,055.00 l'urdwed -·ft-·· 25,935,540.00 21,289.515.00 Ranunerallon and Salaries 34,902,803.00 10,256 630.00 45,159,433.00 Off'tee Stat'-- 1,464,665.00 1,842,500.00 3,307,165.00 - • - - • /\CCOWII I P