0 STATE AUDIT OFFICE AUDIT REPORT PROGRAM OF “RESULT-BASED SCALING UP RURAL SANITATION AND WATER SUPPLY” Hanoi, October 2023 1 STATE AUDIT OFFICE SOCIALIST REPUBLIC OF VIETNAM Independence - Freedom - Happiness Hanoi, date month year 2023 AUDIT REPORT PROGRAM OF “RESULT-BASED SCALING UP RURAL SANITATION AND WATER SUPPLY” Under Decision No. 915/QD-KTNN dated 29 June 2023 by the Auditor General of the State Audit Office on auditing the “Result-based scaling up rural sanitation and water supply” program (hereinafter refer to the Program), an Audit Delegation of the Specialized Audit Department No. V of the State Audit Office has conducted the audit of the above-mentioned Program from 03 July 2023 to 21 August 2023. 1. Subject matters The management and use of the Program's budget; compliance with the State's policies, regimes and laws; management, direction and coordination in implementing the Program; the fulfillment of the Program's objectives; economy, effectiveness and efficiency of the Program. 2. Audit scope and limitations 2.1. Audit scope - List of audited entities (See the list of Audited entities at Annex No. 01/BCKT-CTMT). - Audit period: Year 2022 and relevant contents up to 30 June 2023. 2.2. Audit limitations - For financial statements prepared in the form required by the Program: As allowed by the WB to include in the outputs of the Program, all external works invested from the state budget and other donors - except for private capital - investment private; At the same time, the identification and verification of the works that are included in the outputs is not done by Specialized State Audit Department V, so for the criteria determined on the output results (receivables from donors, expenses for the formation of fixed assets, temporary collection of capital allocated from the World Bank) and formed from funds not belonging to the Program, the Audit Delegation only noted according to the reports by the audited entities; the audited entities are responsible for the truth and fairness of documents and data provided to the Audit Delegation. 2 - Did not conduct detailed audits of investment costs in construction of works/projects. - Did not conduct detailed audits at the Inspectorate of the Ministry of Agriculture due to small funding amounts in the year, the finalized figures of the Inspectorate's funding have been aggregated in the report of the Department of Water Resources. - Did not inspect or verify policy beneficiaries; Did not inventory assets or cash funds. 3. Audit basis - Law on State Audit, Law on State Budget, Law on Construction, Law on Bidding, other relevant laws and legal documents; - State Audit Standards, Audit procedures, Regulations on Organization and Operation of the State Audit Delegation; - Financing Agreement for Credit No. 5739-VN dated 10 March 2016 by and between the Government of Vietnam and the Donor (IDA) and Decision No. 1395/QD-CTN dated 31 July 2021 on the amendment of Financing Agreement No. 5739-VN of the President of the Socialist Republic of Vietnam; The audit report is prepared on the basis of audit evidences, Audit Minutes and Audit Reports at the audited entities, Financial Statements of the Program of the audited entities and related documents. PART ONE AUDIT SITUATION AND RESULTS I. THE TRUTH AND FAIRNESS OF FINANCIAL DATA AND INFORMATION) 1. Audit results of financial statements of Program Please see more details in the Appendices No. 06, 07, 08/BCKT-CTMT enclosed herewith. 2. Opinions on the truth and fairness of the financial statements and expense finalization of the Program Audited entity's responsibilities Prepare and present truthfully and fairly the program financial statements in accordance with the applicable program financial reporting framework, specifically of the donor's templates; such internal control that the entities determine necessary to ensure the preparation and presentation of the Program financial statements free from material misstatement, whether due to any frauds 3 or errors. State Audit Office of Vietnam (SAV) delegation’s opinion: In the opinion of the Audit Delegation, except for the impacts by the issues mentioned in the scope limitations and the material but not pervasive errors, in terms of materiality, after adjusting the figures according to the audit results, the audited financial statements of the Program of Result-based scaling up rural sanitation and water supply for 2022 have truthfully reflected the situation of funding, incomes, expenditures and in compliance with applicable regulations. II. EVALUATION, CONFIRMATION AND CONCLUSION ON COMPLIANCE WITH LAWS, POLICIES, REGIMES IN PROGRAM MANAGEMENT 1. General evaluation 1.1. Managing, directing and coordinating the implementation of the Program - At the Ministry of Agriculture and Rural Development Year 2022 was the final year of Program implementation. The Ministry of Agriculture and Rural Development direct the Rural Water Supply Program Coordination Board1 (abbreviated as PCB) under the General Department of Water Resources (abbreviated as GDWR) is responsible for the overall coordination of the Program. In addition to the annual management, direction, administration and coordination activities (coordinating and guiding the provinces to develop annual plans; incorporating the reports into a consolidated one on the implementation results of the Program; coordinating technical assistance for 21 provinces; checking, monitoring and reporting on implementation progress). - In the provinces implementing the Program In 2022, the Program Executive Board/Steering Committee of the Provinces2 continued to enhance their human resources in line with changes in personnel at member agencies and units. The Program Management/Steering Committee issued operating regulations, assigned tasks, stipulated working procedures and coordination responsibilities among Departments, sectors... in implementing the Program in the provinces. Based on the Program regulations, directives on implementing the Program for the extended period until July 2023, 1 Decision No. 593/QD-TCTL-VPTC dated 08 September 2016 of the General Department of Water Resources. 2 The Executive Boards/Steering Committees of the Program were established since the outset of the Program implementation, headed by the Chairman or 01 Vice Chairman of the respective Provincial People's Committees; their members are leaders of relevant departments and agencies, operating under the regulations of the Executive Boards/Steering Committees, and assigning specific tasks to members, agencies and units. 4 and guidance documents of the Department of Water Resources3, the Management/Steering Committees of the provinces directed the development of Program implementation plans for 2022, identifying specific targets on disbursement rate, implementation plans for components to ensure alignment with the overall objectives of the Program locally as a basis for implementation. The Departments of Agriculture and Rural Development (coordinating/standing agencies of the Program), synthesizing agencies (Finance, Planning and Investment, State Treasury) coordinated to guide participating units in implementing the Program according to current regulations and approved plans. 1.2. Work of developing capital allocation plans for each locality Implementing the financial mechanism of the Program, the Program Coordination Unit issued documents for localities to develop capital withdrawal plans, capital withdrawal procedures4, and carry out signing capital withdrawal requests to transfer funds to agencies/localities implementing the Program. Based on the guidance of the Irrigation Department, after reviewing and cross-checking the outputs accepted by the WB for disbursement, the localities aggregated the disbursed values according to the verification results and sent them to the Program Coordination Unit for review, aggregation and submission to the Ministry of Finance (through the Foreign Debt Management and External Finance Department) for disbursing capital to localities implementing the Program. For counterpart funds from provincial budget: The provinces allocated 10% of the investment capital for implementing water supply works and recurrent expenditure as needed to ensure implementation of Component 3 - Capacity building, communications, monitoring and evaluation... At the time of audit, which was also near the end of the Program, the Ministry of Agriculture and Rural Development (MARD) coordinated with the Ministry of Finance to guide procedures for provinces to refund WB advance for implementation5. 1.3. Inspection, examination and monitoring of Program implementation - Monitoring: Ministry of Agriculture and Rural Development (Department of Water Resources and National Center for Rural Water Supply and Sanitation) continued to monitor, provide technical assistance to provinces to assess the status of management, operation, exploitation of concentrated water supply works 3 Document No. 2092/TCTL-NN dated 15 November 2021 on summarizing the implementation results and developing the Program Plan for 2022. 4 Dispatch No. 34/TCTL-BDP dated 07 March 2022 of the Department of Water Resources on capital withdrawal procedures of the Program; 5 Dispatch No. 2377/BNN-TL dated 14 April 2023 of MARD guiding procedures for refunding WB advance for the Program; 5 invested, assist provinces in preparing dossiers for verification of new and sustainable water supply works, communications, environment, society, water exploitation permits. - Internal audit and inspection: The MARD Inspectorate is responsible for overall internal audit, developing plans and conducting internal audits, reviewing costs incurred by units under MARD, supervising local internal audit work, consolidating internal audit reports (Internal Audit Report No. 273/Bc-TTr dated 29 June 2023; Report No. 271/BC-Ttr dated 27 July 2022 on complaints and denunciations on fraud and corruption in Program implementation) and submitting them to WB as regulated. - In the provinces implementing the Program: The provincial People Committees assigned agencies/authorized personnel to perform internal audit functions for the Program in the provinces. Internal audit teams carried out the contents guided by the MARD Inspectorate, developed plans and conducted annual internal audits. Among 17 provinces, all conducted internal audits and had internal audit reports as regulated. The internal audit reports in the provinces provided recommendations to improve risk management effectiveness, strengthen control systems and Program management procedures as a basis for the MARD Inspectorate to monitor implementation of internal audit recommendations in localities as regulated. 1.4. Status of the implementation of the Program's objectives, contents and the Program implementation progress Memorandum of Understanding of the working delegation between MARD and WB dated 17 July 2023 assessed the implementation results of the Program as follows: - Implementation results of DLI disbursement indicators: As of 30/6/2023, the provinces have basically completed 100% and exceeded the plan of >100% for all disbursement indicators. Details as follows: DLI 1.1: reached 110% (116/105 planned); DLI 1.2 reached 103% (703/680 new commune-wide sanitation - CWS); DLI 1.3 reached 112% (285,599/255,000 new water connections); DLI 2.1 reached 138% (145,246/105,000 sustainable water connections); DLI 2.2 reached 131% (446/340 CWS communes after 2 years); DLI 3.1 reached 135% (291/215 annual plans and reports); DLI 3.2 reached 118% (124/105 annual capacity building plans). - On rural water supply: There were 660 works constructed or upgraded with Program funds and 102 remaining works invested with other funding sources; 285,599 new water connections were made (exceeding the target of 6 255,000 connections by 12%), including over 145,246 sustainable connections (exceeding the target of 105,000 connections by 13.83%). - Rural sanitation: There were 703 communes achieving CWS (exceeding the target of 680 communes by 3.8%), including 446 communes with sustainable CWS (exceeding the target of 340 communes by 31.17%) and 166,658 new and upgraded latrines from various funding sources including 70,473 latrines constructed and upgraded with Program funds; 816 clean water supply and sanitary latrine works in clinics were newly constructed or upgraded. 1.5. Compliance with laws and regulations on financial management, accounting, and sponsor's regulations, financing agreement 1.5.1. Compliance with regulations on financial management, accounting The Program implementing units have basically complied with the Law on State Budget, Accounting Law as well as guiding documents for implementation of the Laws, Financing Agreement; opened books of account, recorded, accounted for and archived documents adequately as regulated, prepared annual Financial Statements according to Program-prescribed forms at year-end. 1.5.2. Management and use of capital In the audited provinces, based on their assigned tasks, the Program implementing units developed estimates, the standing agency aggregated annual capital demands and submitted them to provincial advisory agencies for appraisal before submission to provincial People Committees for approval. Based on the medium-term public investment plan of the province and the approved 2022 budget estimate, the provincial People Committees issued decisions on capital allocation to using units in compliance with regulations, aligned with the Program's financial mechanism (Document No. 6529/BTC-QLN dated 16 May 2016 of the Ministry of Finance), the Program implementation plan in the province, the province's medium-term public investment plan. - WB capital disbursed into the province's source account was transferred to corresponding subsidiary accounts with budget estimates allocated to directly implementing units; sets of documents were gathered and submitted to the State Treasury for disbursement under pre-payment control mechanism; relending in most provinces was basically monitored and fully accounted for; interest was determined and paid as per Relending Contracts; 1.5.3. Compliance with Financing Agreement Based on the Financing Agreement No. 5739-VN between the Vietnamese Government and the World Bank, MARD's guidance on Program implementation, the standing agency of the Program developed periodic and 7 annual Program plans for submission to PPCs for approval before sending to MARD and the World Bank (WB) as regulated. Besides, as committed with the donor, the Program had to establish an internal audit function. The MARD Inspectorate was responsible for overall internal audit, supervising local internal audit work, consolidating internal audit reports for submission and reporting to WB, monitoring implementation of internal audit recommendations in localities. In the implementing provinces, the provincial People Committees issued Decisions on establishing and consolidating the Program’s Intern al Audit Teams; the Teams developed plans and conducted audits, prepared Internal Audit Reports which assessed implementation of audit recommendations by the State Audit Office of Vietnam (SAV) in Audit Reports, difficulties, advantages and recommendations. 1.6. Work of monitoring, summarizing and reporting to Provincial Steering Committee on formulation, allocation, disbursement of funds; monitoring, recording debts, arranging sources for debt repayment; recording revenue and expenditure; classifying funding sources, arranging counterpart funds as committed: The Program's standing agency in provinces summarized capital demands of implementing units to develop the Program's capital plan for 2022; coordinated with related departments/sectors as assigned to submit to provincial People Committees for consideration and allocation of Program capital to using units as regulated, as a basis for disbursement and finalization. - Arrangement of counterpart funds for Program implementation: The participating provinces basically complied with counterpart fund arrangement as regulated, 12/17 audited provinces fully arranged investment capital for implementing water supply works and recurrent expenditures for activities under Component 3 of the Program. - Procedures and disbursement progress of Program funds: Implementing units submitted dossiers and documents to State Treasuries for inspection, control and timely disbursement; at year-end, balances were reconciled between State Treasury and implementing units. Total loan capital allocated in Program Documents6 was VND 4,286 billion; as of 31/01/2023, VND 3,976 billion was received from WB, VND 3,897 6 Decision No. 1476/QD-BNN-HTQT dated 06 April 2021 of the Ministry of Agriculture and Rural Development on adjusting the project document for the Program of “Result-based scaling up rural sanitation and water supply”, borrowing from the World Bank; 8 billion was disbursed to implementing units (97%). - Recording state budget revenue and expenditure: Basically, capital-using units coordinated with State Treasuries to fully and timely record state budget revenue and expenditure, 16/17 audited provinces ensured revenue and expenditure were recorded as regulated in Article 76 of Decree 114/2021/ND-CP dated 16 December 2021 on management and use of ODA and concessional loans from foreign donors. - Work of monitoring, recording debts, arranging sources for debt repayment: Relending in most provinces was monitored and fully accounted for; interest was determined and paid strictly according to Relending Contracts. At year-end, Program implementing units prepared Financial Statements, Reports on Program implementation progress and submitted them to the standing agency for aggregation into overall provincial reports to be sent to MARD as regulated. 2. Existing limitations 2.1. Status of the implementation of the Program's objectives, contents, and the Program implementation progress - As of 30/6, some disbursement indicators were not met in several provinces (DLI 1.3 disbursement indicator - New water connections: Cao Bang reached 98.5%; DLI 1.1 indicator: Gia Lai reached 80%, Lai Chau reached 80%, Hoa Binh reached 80%, DLI 3.2 indicator - Number of capacity building plans: Lai Chau: 80%, Hoa Binh reached 60%, DLI 2.1 indicator - Sustainable water supply including Lam Dong province reached only 75%). - Some completed works have not been approved for finalization, specifically: Lam Dong province: 07 works7, Dak Lak: 05 works8, Hoa Binh 03 7 Expanding water supply connections of Di Linh district system supplying Hoa Ninh, Dinh Hoa Trang communes; supplying Dinh Lac, Lien Dam, Bao Thuan communes; Bao Loc city water supply system supplying Loc Chau, Dai Lao communes; Thanh My town water supply system supplying Quang Lap commune and vicinity; Expanding water supply station connections of Lam Ha water supply plant supplying Tan Van, Da Don communes; Bao Loc city water supply works supplying Loc Nga, Loc Thanh communes; Expanding water supply station connections of Tan Ha commune of Lam Ha water plant supplying Tan Ha, Hoai Duc, Dan Phuong communes; 8 Upgrading and repairing Ea Ho commune water supply work, Krong Nang district; Upgrading and expanding Krong Kmar commune water supply work, Krong Bong district; Ea Bar residential area water supply work, Buon Don district; Upgrading, repairing sanitation, water supply and drainage system of Dak Lieng health station, Dak Phơi residential area health station, Lak district; 9 works9, Gia Lai 05 works10, Bac Giang: 08 works11, Dak Nong: 09 works12, Bac Kan 01 work, Lang Son 09 works13, Cao Bang 52 works14, Lai Chau 11 works15, Phu Tho 04 works16, and Binh Thuan 01 work17. - Some completed investment works have not been handed over for operation to maximize Program effectiveness (Lang Son: 8 works18, Gia Lai: Water supply work for Ia Rto commune, Ayun Pa do town). - At the time of audit, Lai Chau province still had 01 work of Water supply for village cluster of Trung Dong commune, Tan Uyen district with unfinished items of water intake headwork, installation of meters to households; 9 Repairing, upgrading Vinh Tien commune water supply work, Kim Boi district and Repairing, upgrading Mong Hoa commune water supply work; Repairing, upgrading Vu Ban town water supply work, Lac Son district; 10 Ia Me commune water supply, Chu Prong district; Bau Can commune water supply, Chu Prong district; Ia Tor commune water supply, Chu Prong district; Ia Rto commune water supply work, Ayun Pa town 11 [Inter-commune clean water supply system for Dong Hung and Dong Phu communes, Luc Nam district; Inter- commune clean water supply system for Tam Tien and Dong Vuong communes, Yen The district; Renovating, upgrading, expanding Luc Nam town clean water supply system, Luc Nam district; Clean water supply system for Dai Thanh and Hop Thinh inter-commune, Hiep Hoa district; Inter-commune clean water supply system for Phuong Son and Quy Son communes, Luc Ngan district; Clean water supply system for Deo Gia-Cong Luoc hamlet, Deo Gia commune and Inter-commune clean water supply system for Phong Van-Phong Minh communes, Luc Ngan district; Renovating, upgrading, expanding clean water supply system for Lai and Hai hamlets, An Ba commune and clean water supply system for Tuan Dao commune, Son Dong district; Renovating, upgrading, expanding clean water supply system for Bo Ha commune, Yen The district 12 New Quang Phu - Dak Nang water supply work, Krong No district; Nam N'Jang commune concentrated water supply, Dak Song district; Dak Buk So commune center water supply project, Tuy Duc district; New Thuận An commune concentrated water supply project, Dak Mil district; Expanding Dak Mil town water supply work, Dak Mil district; Quang Son commune concentrated water supply area, Dak Glong district; Clean water supply for Dak Sin commune health station; Clean water supply for Dao Nghia commune health station; Clean water supply for Nhan Dao commune health station; 13 08 works implemented by the Center for Rural Water Supply and Sanitation; 01 work implemented by the Department of Education and Training; 14 Including 38 water supply works implemented by the Center for Rural Water Supply and Sanitation and 14 works implemented by the Center for Disease Control; 15 Central water supply for Nam Xe commune, Phong Tho district; Central water supply for Pac Ta commune, Tan Uyen district; Water supply for Hung Phong, Na Sang, Na Ni villages, Ban Bo commune, Tam Duong district; Water supply for team 9, Xa Po, Phuc Than commune, Than Uyen district; Central water supply for Nam So commune, Tan Uyen district; Water supply for Huoi Ke village + 46, Son Binh commune, Tam Duong district; Water supply for Na An 1 + 2 villages, Muong Khoa commune, Tan Uyen district; Water supply for Nam Cai village, Nam Hang commune, Nam Nhun district; Water supply for Na Lang + Bum Bua villages, Bum Nua commune, Muong Te district; Water supply for Na Hu 1, Na Hu 2 villages - Bum Nua commune - Muong Te district; Water supply for Them Thau, Hoa Lu villages - Binh Lu commune - Tam Duong district; 16 Clean water supply system for Bang Gia commune, Ha Hoa district; Clean water supply system for Luong Lo, Do Son, Do Xuyen communes, Thanh Ba district; Clean water supply system for Lang Son, Mai Tung communes, Ha Hoa district; Expanding Trung Nghia commune water supply work, Thanh Thuy district; 17 Water supply work for Ham Cuong, Ham Kiem, Ham Minh communes, Ham Thuan Nam district; 18 According to the unit's report, 05 new works had outstanding issues not yet handed over: Water supply for Nhan Ly, Bac Thuy communes, Chi Lang district; Renovating, repairing water supply works for Thien Long, To Hieu, Hong Phong communes, Binh Gia district; Expanding urban/municipal water supply works to rural areas in Lang Son province phase I; Water supply for Mai Sao commune, Chi Lang district; Expanding urban/municipal water supply works to rural areas in Lang Son province phase II and 03 works were addressing outstanding issues for handover: Water supply for Yen Binh commune, Huu Lung district; Water supply for Quyet Thang commune, Huu Lung district; Water supply for Dong Quan commune, Loc Binh district 10 - According to Program implementation results reports as of 30 June 2023 in Lam Dong19 and Tuyen Quang20 provinces: there were water supply works stopped without further implementation despite disbursement of some investment costs21, specifically: + In Lam Dong province: Expanding water supply connections of Da Lat city system supplying Ta Nung, Me Linh, Gia Lam communes and vicinity; the reason for stoppage was insufficient time for implementation to complete the workload before 31 December 2022, consultation fees of VND 499 million were paid. + In Tuyen Quang province: Thai Binh commune water supply work, Yen Son district; the reason for stoppage was the construction contractor stopping work in violation of contractual schedule, VND 1,660 million/VND 1,767 million of the certified workload was disbursed. 2.2. Compliance with laws and regulations on financial management, accounting, and sponsor's regulations, financing agreement - Some provinces participating in the Program have not arranged sufficient counterpart funding as committed: Thai Nguyen22, Lao Cai (reaching 80.09%), Lai Chau (reaching 79.83%), Phu Tho (reaching 52%), Dak Nong (77.8%); - Loan monitoring, accounting and repayment: Dak Nong province has not fully paid the principal, interest and commitment fees of the on-lent loan as required in Sections c, d Item 2.01 of the On-lending Agreement No. 46 dated 11 June 2018 between the province and the Ministry of Finance (as of 30 June 2023, outstanding principal of USD 10,342 unpaid interest of 36,127 USD and unpaid commitment fee of USD 7,287); - Refund of unused funds: As of 30 June 2023, most provinces have not carried out procedures to refund unused funds of the Program as guided in Official Letter No. 4658/BTC-QLN dated 10 May 2023 of the Ministry of Finance and Official Letter No. 07/TL-BDB dated 08 June 2023 of the National Rural Water Supply and Sanitation Program Coordination Board. Accordingly, the unused allocated funds from the central budget must be returned to the central budget, 19 Dispatch No. 1946/SNN-KH dated 14 August 2023 of the Department of Agriculture and Rural Development of Lam Dong Province; 20 Report No. 272/BC-SNN dated 21 July 2023 of the Department of Agriculture and Rural Development of Tuyen Quang Province on implementation results of the Program for the 2016-2022 period; 21 The audit team did not conduct detailed audits of investment costs of projects within the audit scope. The audit team reviewed based on the program implementation results reports provided by the provinces. 22 Within the 10% counterpart funding from local budgets, there is 5% community contributions equivalent to 7,998 billion VND. However, so far only 13.8% of this amount has been achieved (VND 1,109 billion/ VND 7,998 billion). 11 and the unused on-lent funds in the provinces must be accounted for in the provincial budgets. According to the reports of the audited provinces, the unused World Bank loan balances allocated from the central budget as advances as of 30 June 2023 are: VND 44,911,213,045 (details in Appendix 05a/BCKT-CTMT). Specifically, for Lai Chau province, as the construction items of the water intake facilities and household water meter installation for the Trung Dong village cluster's water supply system in Tan Uyen district have not been completed by the audit time, the remaining refundable amount has not been determined. - Lam Dong province has not fully recorded the State budget as required in Article 76 of Decree 114/2021/ND-CP dated 16 December 2021 on management and use of official development assistance (ODA) and concessional loans from foreign sponsors. The unrecorded amount is: VND 413,364,000 (disbursed funds for Department of Education and Training). - Outstanding debts as of 30 June 2023 in some provinces have not been collected/settled (Receivables in Gia Lai: VND 62 billion; Payables in Phu Tho: VND 12,720 billion, Kon Tum: VND 22 billion, Gia Lai: VND 995 billion). * Conclusion for item II: Basically, the whole Program has basically achieved its objectives, contents and schedule as planned. The achieved results have contributed to solving sanitation and clean water issues, preventing diseases, and improving people's health. However, 2022 is the final year of program implementation, but the implementation process in some provinces still has some limitations regarding the lack of achieving committed counterpart funding ratio, slow approval of project finalization, and failure to complete some Program disbursement indicators. III. EVALUATION OF ECONOMY, EFFICIENCY AND EFFECTIVENESS 1. General evaluation The audit results show the in the process of directing, operating, managing and conducting the Program, the stakeholders have coordinated to implement and comply with relevant regulations, contributing to improvement of the Program's effectiveness at provinces; The investment projects, when being completed and put into use, will help to address the shortage of domestic clean water, contributing to reducing epidemics, improving public health and quality of life in the locality. 2. Existing limitations 12 - Economy: The suspension of construction for some projects while certain investment costs had been paid as stated in the audit results has somewhat affected the Program's economic efficiency. - Efficiency: The Program's extension of implementation period; failure to achieve some disbursement indicators; lack of review and accurate determination of refundable amounts to close the loan account as required, have impacted the Project’s effectiveness. - Effectiveness: Some provinces' lack of counterpart funds, failure to meet required ratio; some unfinished projects, lack of timely approval for finalization and operation per original plan have reduced the Program's efficacy. * Conclusion for item III: The program's implementation period was extended until 31 December 2022 (loan closing date extended to 31 July 2023), but by 30 June, the implementing units have not completed some disbursement indicators, not timely approved project finalization, not achieved required counterpart funding ratio, not completed procedures to refund unused funds as guided by MARD and the Ministry of Finance, which has affected the Program's economy, efficacy and effectiveness. PART TWO AUDIT RECOMMENDATIONS 1. To audited entities 1.1. Adjusting accounting books, financial statements, and settlement reports at the request of the State Auditors; 1.2. Financial handling: VND 44,911,213,045, including: Recovery and payment to the state budget (up to 30 June 2023): VND 44,911,213,045 (Details in Appendix No. 05/BCKT-CTMT) 1.3. Fully record State budget as regulated (Lam Dong province); 1.4. Report to competent authorities on the lack of counterpart funding to meet program requirements (Thai Nguyen, Lao Cai, Lai Chau, Phu Tho, Dak Nong); 1.5. Recommendations for rectification and lesson learning in the management and direction of the Program; management and use of public finance and assets: - Dak Nong province has not fully paid loan principal, interest and commitment fees according to the On-lending Agreement between the Provincial People's Committee and the Ministry of Finance. 13 - Lam Dong province has not fully recorded state budget revenues and expenditures for funding provided to Department of Education and Training. - Lai Chau province has not completed some construction items of the Trung Dong village cluster's water supply system in Tan Uyen district. - 2022 is the final year of program implementation, however there are still completed projects pending approval of finalization (Lam Dong, Dak Lak, Hoa Binh, Gia Lai, Bac Giang, Dak Nong, Bac Kan, Lang Son, Cao Bang, Lai Chau, Phu Tho, Binh Thuan); slow handover for use of completed projects (Lang Son, Gia Lai); - Not yet refunded unused program funds as guided in Document No. 4658/BTC-QLN dated 10 May 2023 of the Ministry of Finance and Document No. 07/TL-BDB dated 08 June 2023 of the National Rural Water Supply and Sanitation Program Coordination Board (Cao Bang, Bac Kan, Lang Son, Thai Nguyen, Bac Giang, Tuyen Quang, Hoa Binh, Dak Lak, Lam Dong, Ninh Thuan, Binh Thuan, Kon Tum). - As of 30 June 2023, there are still outstanding debts not settled/recovered (Gia Lai, Phu Tho, Kon Tum). 1.6. Recommendations on directing inspection, review and handling according to regulations for the termination of Program-invested water supply projects: - The Chairman of Tuyen Quang Provincial People’s Committee direct the inspection, review and handling according to regulations and take measures to ensure the use of funds in accordance with the Program's regulations for Thai Binh commune's water supply project, Yen Son district. - The Chairman of Lam Dong Provincial People’s Committee direct the inspection, review and handling according to regulations and take measures to ensure the use of funds in accordance with the Program's regulations for the Extension of Da Lat city's water supply system to supply Ta Nung, Me Linh and Gia Lam communes project. 1.7. Advisory opinions on solutions to improve program management; management and use of public finance and assets. - Provincial People’s Committees directs the Program implementing units to promptly gather dossiers for submission to competent authorities for approval of finalization and handover for operation of completed projects, specifically: (Lam Đong: 07, Đak Lak: 05, Hoa Binh: 03, Gia Lai: 05, Bac Giang: 08, Đak 14 Nong: 09, Bac Kan: 01, Lang Son: 09, Cao Bang: 52, Lai Chau: 11, Phu Tho: 04, Binh Thuan: 01); handover for use (Lang Son: 8, Gia Lai: 01). - Provincial People’s Committees direct the standing agencies and implementing units to clarify receivables and payables for recovery/payment measures according to regulations (Gia Lai, Kon Tum, Phu Tho); - Determine the unused, remaining program funds to carry out procedures for refunding the central budget and recording in local budgets as guided in Official Letter No. 4658/BTC-QLN dated 10 May 2023 of the Ministry of Finance and Document No. 07/TL-BDB dated 08 June 2023 of the National Rural Water Supply and Sanitation Program Coordination Board. 2. For the National Rural Water Supply and Sanitation Program Coordination Board (Department of Water Resources – Ministry of Agriculture and Rural Development) Guide and urge localities implementing the Program to complete liquidation, finalization procedures and refund WB advance payments according to regulations. * ** Require the Ministry of Agriculture and Rural Development coordinate with Provincial People's Committees to direct audited units to seriously and promptly implement the State Audit Office's recommendations in this Audit Report and provincial audit reports; report implementation results to the State Audit Office of Vietnam, Specialized Audit Sector V at 116 Nguyen Chanh, Cau Giay, Hanoi before 31 March 2024; After the above time limit, audited units shall be responsible for violations of regulations on implementing audit conclusions and recommendations by the State Audit Office as stipulated in Article 14 of the Ordinance on Handling of Administrative Violations in the Field of State Audit. The report on implementation of audit conclusions and recommendations must specify: recommendations implemented; recommendations being implemented; recommendations not yet implemented (for implemented recommendations, specify evidence names, attach copies of documents, vouchers... as proof; for recommendations being and not yet implemented, clearly explain the reasons) . When implementing the State Audit Office's recommendations, make accounting entries as guided in Appendix 02/BCKT-CTMT and send letter to the State Treasury as in Appendix 03/BCKT-CTMT. This audit report consists of 13 pages, from page 01 to page 13 and 15 Appendices No. 01, 02, 03, 05, 05a, 06, 07, 08/BCKT-CTMT are integral parts of the audit report./. HEAD OF STATE BY ORDER OF THE AUDITOR GENERAL AUDIT DELEGATION CHIEF AUDITOR OF SPECIALIZED AUDIT DEPARTMENT V (Signed) (Signed and Sealed) Doan Thi Thu Ha Tran Hai Dong State Auditor’s card No.: B 0172