Hotel City Star Campus, 108, Subhash Road LOVESH KALRA & CO. Dehradun - 248 001 Phone 0135 - 3592841 CHARTERED ACCOUN\JTANTS Fax: 0135-2650695 Email caloveshkar a@gmailcom Independent Auditor's Report To, Project Director Uttarakhand Health System Development Project 2nd Floor, Indian Red Cross Society Building P.O.Gujrara, Dandalakhond, Sahastradhara Road, Dehradun, Uttarakhand Report on the Audit of the Project Financial Statements Opinion We have audited the accompanying special purpose financial statements of Uttarakhand Health System Development Project (the Project) financed by the International Development Association (IDA) under Credit/Loan 5948-IN and implemented by Department of Medical Health & Family Welfare, Uttarakhand. These financial statements comprise of the Statement of Sources and Uses of Funds, Statement of reconciliation of claims along with notes to accounts to these financial statements, including a summary of significant accounting policies (collectively referred to as the "Project Financial Statements"). These statements are the responsibility of the Project's management on which we are expressing our opinion on the Financial Statements provided by them and other documents connected with the records, maintained & produced before us to base our opinion. Our responsibility is to express an opinion on the accompanying financial statements based on our audit. In our opinion,the aforesaid special purpose Project Financial Statements give a true and fair view of the financial position of the Project as on March 31, 2024, and receipts and disbursements of the Project for the year ended on March 31, 2024 and the expenditure of the Project for the year ended on March 31, 2024, in accordance with the financial reporting provisions of Section 5.09 of the General Conditions of the World Bank read with the Financing Agreement and Project Agreement both dated 23rd Day of March 2017. Basis for Opinion We conducted our audit in accordance with the S+anrlards on Auditing issued by Institute of Chartered Accountants of India (ICAI). 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 implementing agency in accordance with the ICAl's Code of Ethics for undertaking this assignment, and we have fulfilled our ethical responsibilities in accordance with ICAl's Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Emphasis of Matter We draw attention to the PFS describing the basis of accounting. The PFS is prepared to assist the Uttarakhand Health System Development Project to meet the financial reporting requirements of the Project's Financing Agreements for Investment Project Financing dated 23 rMarch 2017 in respect of preparation of the Project Financial Statements in a manner to reflect the operations, resources and expenditures related to the Project. As a result, these special purpose financial statements may not be suitable for another purpose. Our opinion is not modified in respect of this matter. Responsibilities of Management and those charged with Governance for the Project Financial Statements The Management of the implementing agency is responsible for the preparation and fair presentation of the Project Financial Statements in accordance with the financial reporting framework described in these financial statements, and for such internal control as management determines is necessary to enable the preparation of Project Financial Statements that are free from material misstatement, whether due to fraud or error. The Management and those charged with governance are responsible for overseeing the implementing agency's financial reporting process. Auditor's Responsibilities for the Audit of the Project Financial Statements Our objectives are to obtain reasonable assurance about whether the Project 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 the Standards of Auditing 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 Standard of Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: * identify and assess the risks of material misstatement of Ihe Project 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 2| 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. * Evaluate the overall presentation, structure and content of the Project Financial Statements, including the disclosures and whether these financial statements present the Project's operations and underlying transacJions and events in a manner that achieves fair presentation in accordance with the financial reporting provisions described in Notes to the Project Financial Statements. * Communicate 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, * 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, relate I safeguards. Other Matter The implementing agency Uttarakhand Health & Family Welfare Society has prepared a separate set of entity financia statements for the year ended March 31, 2024 on which M/s Rawat Nakoti & Co. are conducting audit. Report on Other Legal and Regulatory Requirements Further to our opinion on the Project Financial Statements we further report that: a) we have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit b) in our opinion, proper books of accounts have been kept by the implementing agency for Project purposes so far as appears from ou- examination o' those books; c) the Project Financial Statements dealt with by this report is in agreement with the books of accounts; d) the Project funds were utilized for the purposes for which they were provided; e) expenditures, including assets created under the Project, shown in the PFS are eligible for financing under the Project Financing Agreements; 3 Page f) Interim Financial Reports (IFR) submitted by the Project management can be relied upon to support applications for withdrawal of the Loan, and adequate supporting documentation has been maintained to support these claims; g) Procurement has been carried out in line with the agreed procedures as detailed in the Operations Manual/Procurement Manual/Project Implementation Plan/Legal Agreements; and h) The Project has an adequate internal financial control system (including IT controls) and such controls were operating effectively as at March 31, 2024 and the Project complies with the provisions on financial management contained in the Operations Manual/Project Implementation Plan/ Financial Management Manual, in all material aspects. For Lovesh Kalra & Co. Chartered Accountants FRN: 016432C iovesh Kalra (Chartered Accountant) MRN: 416001 U DIN: 24416001 BKDBCX1 279 Place of Signature: Dehradun Date: 19/11/2024 4 I Notes to Accounts Forming Part of Financial Statements as on March 31, 2024 1) The Following are the details of the sources and application of funds of the project for FY 2023-2024: * Opening Balance of Grant was Rs. 107,68,38,084/- (Rupees One Hundred seven crores sixty eight lacs thirty eight thousand eighty four Only). * An amount of Rs. 94,50,00,000/- (Rupees Ninety FourCroreFifty lacs Only) was received as grants during the year. * Total expenses reported for the project are Rs. 1,61,92,33,351/-(Rupees One Hundred sixty one Crore ninety two Lakh thirty threeThousand three hundred fifty one Only). 2) The project is following cash basis of accounting wherein an expense is recorded when cash is paid out. 3) Interim Unaudited Financial Report (JUFR) for the project has been submitted for the following periods: * 30th June 2023 * 30"h Sep 2023 * 31st Dec 2023 * 31stMar2024 Page 68 of the Operational manual states that "IUFR based disbursement will be used for the Project which shall be submitted to the Bank on a quarterly basis within 45 days from the end of the quarter." 4 IUFRs have been submitted during the year and the same are on quarterly basis as mentioned in the operational manual. 4) During the FY 2021-22 the project has advanced an amount of INR 39,97,34,953.00/- to procurement agent for supply, installation, commissioning and maintenance of 9 ICUs as per clause 41.2 of the General conditions of contract. The same has been treated as disbursement as perpoint 9.7.4 of the Operational Manual but in tally the same is being maintained under loans and advances Head for accounting purpose. 5) As per accounting standard-10, Property Plant and Equipment, depreciation should be charged on the Fixed Assets, but during the current year management has not charged depreciation on the Fixed Assets. 6) As per the contract with T & M Services Consulting Private Limited for Recruitment and Management of HR Recruitments at 5 government district hospitals in Uttarakhand and Project Implementation Team kPI.) under nCluse 6.2 " The value of the contract shall be 1.69% of the Gross Emoluments paid to the Human Resource Hired through and managed by the service provider under the contract. The provisional value of the contract figure is Rs. 1,33,51,000/- subject to change, based on the emoluments paid." However, the government has restricted the management fees to be paid as per Pay Band of Rs. 1.50 lakh to Rs. 1.75 lakh which was later approved in PGB minutes dated 13th August, 2021. The HR Agency has charged the management fees on Actual/Revised Pay Band which was also approved by UKHSDP. It is suggested that management fee should be paid as per Contract clause 6.2 7) Uttarakhand Health System Development Project should focus on efficient contract management to ensure timely completion of contracts in accordance with contract conditions. For Lovesh Kalra & Co. Chartered Accountants FRN: 016432C ovesh Kalra (Chartered Accountant) MRN: 416001 UDIN: 24416001BKDBCX1279 Date: 19/11/2024 Place: Dehradun 2I . Annexure-I UKHSDP PROJECT-5948 IN Sources and use of Funds (Amount in Z Lakhs) Non Expenditure claimable Eligible Reimburseme Reimbusable Particulars FOR the Expenditure nt % amount FOR theya year _____ yea r Sources 1 2 3=(1)-(2) 4 5 3x4 Opening bank Balance as on 01.04.2023 10768.48084 10768.48 80% Add: Amount received during the year 9450.00 9450.00 Add: Interest 0.00 0.00 Less: Interest refund to GoUK 0.00 0.00 Add: Other Receipts:- Tender Fee and amount reversed 0.50 0.50 Total Sources 20218.98 Expenditure by Component: Component 1: Innovations in engaging the private sector Sub-component 1.1: Innovations in integrated delivery of Healthcare Services 5753.50604 5753.51 80% 4602.80 Sub-component 1.2: Innovations in Healthcare Financing Component 2: Stewardship and System Improvement Project core team and office expenses 9983.58347 9983.58 80% 7986.87 Capacity Building, Information System, Research as per PP Covid Emergency Response Component 455.244 455.24 80% 364.20 TOTAL Uses (PROJECT EXPENDITURE) 16192-3335 16192-33 80% 12953.87 lClosing Balance as on 31.03.2024 4026.64733 4026.65 Financ Comptroller Project Di ctor Note:- 1. This financial statement is prepared on CASH basis of accountin 2. Any other project specific Note. ~I~I UKIHSDP PROJECT-5948 IN Ann,xurc-2 (Anount in ? IAh0 Prev'Iiu Pruoject to Particulars Schedules Current Year Per Proi_ct_In Bank Funds claimied (A) I 12,954.16 9932,16 42832.02 Withdrawal claims for 1st half year as per IUFR 3989.760 4657.36 17693 62 Withdrawal claims for 2nd half year as cr lUFR 8964.400 5274.8 25138.4 Total Bank funds claimed Total expenditure made during the year (B) Expenditure as per books of account 16192.3335 12414.8360 53539.2235 Less: Ineligible expenditure (C) II Expenditure not claimed (D) Ill Total eligible expenditure claimed (E)=(B)-(C)-(D) 16192.3335 12414.836 5353922 World Bank Share @ 80% of (E)=(F) 12953.867 9931.87 Excess/Shortage of claims over expenditure (A)-(F) 0.293 0.291 Finance mptroller Project Dirt ctor Notes:- I Total expenditure made during the year (B above)I-ist