Supreme Audit Office Government of Islamic Republic of Afghanistan INDEPENDENT AUDITORS' REPORT To The President of the Government of Islamic Republic of Afghanistan. A Report on the Financial Statements 1. We have audited the accompanying statements of Cash Receipts and Payments (the "Financial Statements") of the Afghanistan Agricultural Inputs Project (AAIP), bearing World Bank Project ID Number P120397, comprising Grant Agreement Numbers TF-15003 and TF99595 (hereinafter referred to as the "Project") for the year ended 30 Qaws of Solar Year 1394 (22 December 2014 to 21 December 2015), and a summary of significant accounting policies and other explanatory notes. The Ministry of Finance's Responsibility for the Financial Statements 2. The Ministry of Finance (the "Ministry") is responsible for preparation and fair presentation of the Financial Statements in accordance with international Public Sector Accounting Standard "Financial Reporting under the Cash Basis of Accounting." This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the financial statements that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. 3. The Ministry's policy is to prepare the accompanying financial statements on cash receipts and payments basis. On this basis revenue is recognized when received rather than when earned, and expenses when paid rather than when incurred. Auditor's Responsibility 4. Our responsibility is to express an opinion on these Financial Statements based on our audit. We conducted our audit in accordance with the International Organisation of Page I of 3 Supreme Audit Institutions (INTOSAI) standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance on whether the financial statements are free of material misstatement. 5. An audit involves performing procedures to obtain sufficient and appropriate audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error, In making those risk assessments, internal control relevant to the entity's preparation and presentation of financial statements is considered in order to design audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of internal controls. An audit also includes evaluating the appropriateness of accounting policies used, the reasonableness of accounting estimates made by management, as well as evaluating the presentation of the financial stateme 6. We believe that the audit evidence we have obtained is sufficient a provide a basis for our opinion. Opinion P 7. In our opinion, the Financial Statements present fairly, in all maten -A A receipts and payments of the Afghanistan Agricultural Inputs Project (AAIP), beir fir,Wori Bank Project ID Number P120397, for the year ended 30 Qaws of Solar Year 1394 (22 December 2014 to 21 December 2015) in accordance with International Public Sector Accounting Standard "Financial Reporting under the Cash Basis of Accounting." Report on Compliance The Ministry of Finance's Responsibility for Compliance 8. In addition to the responsibility for the preparation and presentation of the financial statements described above, the Ministry of Finance is also responsible for ensuring that the activities, financial transactions and information reflected in the financial statements are in compliance with the following grant agreements (hereinafter jointly referred to as the "Financing Agreements"): a. Grant Agreement No.TF-99595 dated June 30, 2011 entered into between the Islamic Republic of Afghanistan and the International Development Association (acting as administrator of Afghanistan Reconstruction Trust Fund), for the provision of Two Million Four Hundred Thousand United States Dollars (USD 2,400,000) funding to the Project; and b. Grant Agreement No. TF-15003 dated June 30, 2013 entered into between the Islamic Republic of Afghanistan and the International Development Association (acting as administrator of Afghanistan Reconstruction Trust Fund), for the provision of Seventy Four Million Seven Hundred Fifty Thousand United States Dollars (USD 74,750,000) funding to the Project. 'age 2 of"3 Auditor's Responsibility on Compliance 9. In addition to the responsibility to express an opinion on the financial statements described above, our responsibility includes expressing an opinion on whether the activities, financial transactions and information reflected in the financial statements are, in all material respects, in compliance with Financing Agreements. This responsibility includes performing procedures to obtain audit evidence about whether all ca iftsand receipts are in compliance with the terms and conditions of Financin ej iuch procedures include the assessment of the risks of material non-complian. 10. We believe that the audit evidence we have obtained is sufficie ta d ap provide a basis for our opinion on compliance. Opinion on Compliance '49 11. In our opinion, in all material respects, the activities, financial transactions and information reflected in the financial statements are in compliance with the terms and conditions of Financing Agreements. Other Matters - Restriction on Use 12. As indicated above, the statements of cash receipts and payments are prepared in accordance with the International Public Sector Accounting Standard "Financial Reporting under the Cash Basis of Accounting" and may not suit another purpose. 13. This report including our opinion is intended solely for the information and use of the President of the Islamic Republic of Afghanistan and the International Development Association and should not be used for any other purpose. We do not accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come. Other Matters - Internal Control Deficiencies 14. During the audit of the financial statements, we noted certain weaknesses in internal controls and other operational matters which have been he Management Letter. These observations and recommendations, all which have been dis ssed with the Ministry, are intended to improve internal control r result in other operating e icienc Ps. r. Mo Sharif Sharifi dito eneral of Afghanistan Supreme Audit Office Kabul, Afghanistan May 2016 PlagJe 3 of 3 Islamic Republic of Afghanistn Afghanistan Agricultural Inputs Project (AAIP) World Bank Reference: Project ID P120397; Grant ID 99595 & 15003 Financial Statements for the year ended 30th Qaws 1394 (21st December,2015) Afghanistan Agricultural Inputs Project (AAIP) World Bank Reference: Project 1 P120397; Grant ID 99595 & 15003 STATEMENT OF CASH RECEIPTS AND PAYMENTS FOR THE YEAR ENDED 30 QAWS 1394 (21 DECEMBER 2015) 1394 1393 Cumulative To Date Payments Payments Controlled by Third by entity Parties Total Total USD USD USD USD USD RECEIPTS Inta Advance 5QQQ Replenishment5,671,098 5,671098 6 TOTAL RECEIPTS 5,671,098 5,671,098 * 43, ,31,726 PAYMENTS ODsbursement Category: ,, 'il oods, Non-Consulting Services, Consultant's C Ices, incremental Operating Costs 6,083,078 6,083.078 Rfund to Donor - 15,135 15,135 n Charges 225 225 150 675 TOTAL PAYMENTS 6,033,303 6,083,303 2,725,467 11,550,195 EXCESS OF RECEIPTS OVER PAYMENTS (412,205) (412,205) (1,162,434) 2,787,531 lTminat (net) 101,630 101,630 470 105,121 ncrease/(Decrease) in Cash & Cash Equivalents (310575) * 310,575 1,161,964) 2,892,652 Cash and Cash Equivalaents at the beginning of the year 3,203,227 3203,227 4,365,191 Increase/(Decrease) in Cash and Cash Equivalents (310,575) (310,575) (1,161,964) Cash and Cash Equivalents at the end of the year 2,892,652 2,892,652 3,203,227 Tne accompanying notes form an integral part of this financial statement M. Mustafa Mastoor Deputy Minister for Finance Ministry of Finance, Islamic Republic of Afghanistan Dated: Apnil 30, 2016 - -- - -- -- - -- Afghanistan Auriculural Inputs Project (AAIP) World Bank Reference: Project ID P120397; Grant ID 99595 & 15003 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 QAWS 1394 (21" DECEMBER 2015) 1) LEGAL STATUS AND ACTIVITY a) The Improving Agricultural Inputs Delivery System (lIDS) Project was setup to develop the financing proposal and -start up activities in order to increase adoption of improved crop production technologies through expanding development of certified seeds and improving access to agricultural inputs of reliable quality. b) The project consists of the following parts: i) Improved Seed Production ii) Quarantine Networks and Quality Control for Agrochemicals; iii) Improvement and Expansion of Input Delivery Systems & ins i"i nal uilding of MAIL. iv) Project Management and Monitoring. V of c) The project is funded by a grant bearing reference number 99595 frdl the Afghanistan Reconstruction Trust Fund in the amount of US Dollars 2,400,000 which was signed in June 2011, out of which an amount of US Dollars 437,834. A follow-on grant bearing reference number 15003 in the amount of US Dollars 74,750,000 was provided which was signed in June 2013. d) The significant terms and conditions that determine or affect the availability of the funding assistance are primarily the presentation of the eligible expenditures to donor within the period as per and in accordance with the financing agreement. e) These financial statements of the Project have been prepared in accordance with the requirements of the Grant Agreement signed between the Government of the Islamic Republic of Afghanistan and the International Development Association acting as an administrator for the Afghanistan Reconstruction Trust Fund. 2) SIGNIFICANT ACCOUNTING POLICIES a) Basis of Preparation The financial statements are prepared under the historical cost convention and in accordance with Cash Basis IPSAS - Financial Reporting under the Cash Basis of Accounting issued by International Federation of Accountants (IFAC). b) Payments Payments made from Special Account are recognised in the financial statements based on the date the cheque is issued and direct payments by World Bank are recognised on the date on which the withdrawal application for the payment is submitted to the World Bank. However, cheques or withdrawal applications that were ultimately rejected by the bank or the World Bank are reversed in the reporting period. c) Reporting Currency The reporting currency is US Dollars. Since US Dollars is the principal disbursement currency of the donor, the financial statements are not prepared in the Afghani which is the currency of Afghanistan. Afghanistan Agricultural Inputs Project (AAIP) World Bank Reference: Project ID P120397; Grant ID 99595 & 15003 d) Currency translations Transactions in currencies other than the reporting currency are translated into US Dollar at the rate of exchange at which the transaction is actually executed. 3) NOTES TO ACCOUNTS a) Receipts These represent grants and aid received during the period. b) Initial Advance ' .... Initial advance represents the advance given by the World Bank into the s te N of the project. c) Bank Charges The Ministry of Finance has negotiated with Da Afghanistan Bank tha 0 be charged on the transactions in the US Dollar Special bank account of n arges may be levied by intermediary banks on deposits into the Special Account aa returned to the World Bank. d) Appendices The accompanying appendices from Al to A5 provide additional information and analysis and form an integral part of these notes, except as indicated otherwise. e) Others These Financial Statements are originally prepared in English and then translated into Dari. In the event of any inconsistency between the English and Dari versions, the English version shall be considered to be correct. Afghanistan Agricultural Inputs Project (AAIP) World Bank Reference: Project ID P120397; Grant ID 99595 & 15003 APPENDIX Al SUMMARY OF WITHDRAWAL APPLICATIONS FOR THE YEAR ENDED 30 QAWS 1394 (21 DECEMBER 2015) Initial Description Application Number Advance Amount USD USD 15003: DA-1 17 1,093,541 DA-1 16 263,480 DA-1 15 586,384 DA-1 14 522,615 DA-1 13 465,990 DA-1 12 579,565 DA-1 11 382,977 DA-1 10 1,301,773 DA-1 9 474,773 Afgzhanistafl Agiricultural Inputs Proec (AIP World Bank Reference: Project ID P120397; Grant ID 99595 & 15003 APPENDIX A2 US Dollar SPECIAL ACCOUNT SUMMARY FOR THE YEAR ENDED 30 QAWS 1394 (21 DECEMBER 2015) Depository Bank: Da Afghanistan Bank (DAB) Address: - - -Kabul USD A/c No. 27497 Opening Balance as per Bank Statement 3,198,948 Add: Initial Advance Replenishment 5,671,098 Deposit against refundsnot deposited in prior year 4,135 Total Additions 5,675,233 Deduct: Payments for Project Expenditure 5,981,304 Refund deposited in other accounts 2,849 Bank Charges 225 Total Deductions 5,984,378 Closing Balance as per B.S 30 QAWS 1394 (21 DECEMBER 2015) 2,889,803 fJr &P. *- Afghanistan Agricultural Inputs Project (AAIP) World Bank Reference: Project ID P120397; Grant ID 99595 & 15003 APPENDIX A3 US DOLLAR SPECIAL ACCOUNT RECONCILIATION FOR THE YEAR ENDED 30 QAWS 1394 (21 DECEMBER 2015) Account No: 27497 Depository Bank: Da Afghanistan Bank (DAB) Depostory ank:Kabul Address: USD USD Closing Balance as per bank statement - 30 QAWS 1394 (21 DECEMBER 2015) Alc No. 27497 2,889,803 Add: Refunds not deposited 2,849 Closing balance as per financial statements - 30 QAWS 1394 (21 DECEMBER 2015) 2,892,652 .00, * Afghanistan Agricultural Inputs Project (AMP) World Bank Reference: Project ID P120397; Grant ID 99595 & 15003 APPENDIX A4 COMPONENT-WISE DISBURSEMENTS FOR THE YEAR ENDED 30 QAWS 1394 (21 DECEMBER 2015) (not an integral part of the Financial Statements) 1393 1394 Cumulative To Date Project Component USD USD USD improved Seed Production 1,640,168 3,734,801 5,527,118 Quarantine Networks and Quality Control for Agrochemicals 252,052 1,452,500 1,769,574 improvement and Expansion of Input Delivery Systems & institutional Capacity Building of MAIL 1,962,179 Project Management & Monitoring 817,963 895,778 2,275,514 Bank Charges 150 225 675 TOTAL PAYMENTS 27101332 6,083,303 11,535,061 K>A ......o . ..... Afghanistan Agricultural Inputs Project (AAIP) World Bank Reference: Project ID P120397; Grant ID 99595 & 15003 Appendix AS STATEMENT OF ESTIMATED GRANT AMOUNT FOR THE YEAR ENDED 30 QAWS 1394 (21 DECEMBER 2015) (MemorandWum Staremit - notan vlegral par of the Financil Sliemnt) 15003 99595 Total in c-urrency of commitment Aiouunt of Grant USD 74,750,000 USD 2,400,000 USO 77150000 Amount disbursed by World Bank untill the end of 13941 USD 12.360,475 USD 1962,166 USD 14.322,641 Cancelled Amount USD 6 USD 437834 USID 437834 Unidisbursed Balance USD 62359525 USC - USD 62,389,525 In reporting currency Amount disbursed by World Bank untill the end of 13941 USC 12.360,475 USD 1,962,166 USD 14,322641 Equivalent US Dollars for undisbursed amount USD 62389,525 USD - USD 62,369,525 Total estimated amount of Grant Funds available USD 74,750,000 USD 1,962,165 USD 76.712,166 Cumulative Payments for expenditure as per the Statement of Cash Receipts & Payments USD 11,429,939 i Actual amounts of total disbursement made by the World Bank since the beginning of the project as available from Client Connection. 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