29 JUN 2016 / 2-7 7-7,5 12 7 815 cTF) tt Lk F,tAA i1-t Guangdong Provincial Audit Office of the People's Republic of China Audit Report 4W&K C2016J 139-# GUANGDONG AUDIT REPORT L2016J NO.139 N14TRTAk (VZk ) r -ixW *A Proj ect Name: Guangdong Agricultural Pollution Control Project Financed by the World Bank #: 8311-CN Loan No.: 8311-CN t # -: TF015418 Grant No.: TF015418 Project Entity:Guangdong Agricultural Pollution Control Project Office 4-&h4#: 2015 Accounting Year: 2015 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
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To Guangdong Agricultural Pollution Control Project Office,
We have audited the special purpose financial statements (from page 6 to page23) of Guangdong Agricultural Pollution Control Project Financed by theWorld Bank, which comprise the Balance Sheet as of December 31, 2015, theSummary of Sources and Uses of Funds by Project Component, the Statementof Implementation of Loan Agreement and Grant Agreement and the SpecialAccount Statements for the year then ended, and Notes to the FinancialStatements.
Project Entity and Guangdong Provincial Finance Department'sResponsibility for the Financial Statements
The preparation of the Balance Sheet, the Summary of Sources and Uses ofFunds by Project Component is the responsibility of your entity, while thepreparation of the Statement of Implementation of Loan Agreement and GrantAgreement and Special Account Statements is the responsibility of GuangdongProvincial Finance Department, which includes:i. Preparing and fairly presenting the accompanying financial statements inaccordance with Chinese accounting standards and system, and therequirements of the project loan (grant) agreement;ii. Designing, implementing and maintaining necessary internal control toensure that the financial statements are free from material misstatement,whether due to ftaud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these financial statements basedon our audit. We conducted our audit in accordance with the GovernmentAuditing Standards of the People's Republic of China and InternationalStandards on Auditing. Those standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assuranceabout whether the financial statements are free from material misstatement.An audit involves performing necessary procedures to obtain audit evidenceabout the amounts and disclosures in the financial statements. The procedures
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selected depend on the auditor's ethical judgment, including the assessment ofthe risks of material misstatement of the financial statements, whether due tofraud or error. In making those risk assessments, the auditor considers internalcontrol relevant to the entities' preparation and fair presentation of the financialstatements in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on theeffectiveness of the entity's internal control. An audit also includes evaluatingthe appropriateness of accounting policies used and the reasonableness ofaccounting estimates made by management, as well as evaluating the overallpresentation of the financial statements.We believe that the audit evidence we have obtained is appropriate andsufficient to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements identified in the first paragraph presentfairly, in all material respects, the financial position of Guangdong AgriculturalPollution Control Project Financed by the World Bank as of December 31,2015, its financial receipts and disbursements, the project implementation andthe receipts and disbursements of special account for the year then ended inaccordance with Chinese accounting standards and system, and therequirements of the project loan (grant) agreement.
Other Matter
We also examined the loan withdrawal application from 8311CN-001 to8311CN-002, the grant withdrawal application from TFl5418-001 toTF 15418-002 and the attached documents submitted to the World Bank duringthe period. In our opinion, those documents comply with the project loan (grant)agreement and can serve as basis for loan and grant withdrawal.
The audit report consists of the Auditor's Opinion and two more partshereinafter: Financial Statements and Notes to the Financial Statements, AuditFindings and Recommendations.
Guangdong Provincial Audit Office of the People's Republic of China
June 16, 2016
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Address: No. 361, West Huangpu Avenue, Tianhe District, Guangzhou City,Guangdong Province, P.R. China
Postcode: 510630
Tel: 86-20-87078196
Fax: 86-20-87078201
The English translation is for the convenience of report users; please take theChinese audit report as the only official version.
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II. Financial Statements and Notes to the Financial Statements
-iBalance-Sheet
BALANCE SHEET2015 * 12 )A 31 0
(As of December 31, 2015)
Project Name: Guangdong Agricultural Pollution Control Project Financed by the World Bank
The Loan No. of Guangdong Agricultural Pollution Control Project Financedby the World Bank is 8311-CN. The Grant No. of Guangdong Agricultural
Pollution Control Project Financed by Global Environmental Facility is
TF015418. The project aims to reduce water pollutant releases from crop and
livestock production in project areas. The contents of the project include:
promoting crop production pollution control, pesticide residue control andconservation agriculture pilot sites etc. in selected project areas, implementingbiogas of big or medium size and waste-water treatment and high-rise pigproduction in 300 selected livestock farms in large scale within the provincewhich is to achieve the dual goal of recycling livestock waste andenvironmental protection and carrying out relevant consulting and training
programs. Project Agreement was signed in February 2014 and came into effectin May 2014, and the closing date is December 31, 2019. Estimated totalinvestment for the project is RMBI,323,104,900.00 Yuan, among which the
World Bank loan is USD100,000,000.00, equivalent to RMB620,000,000.00yuan; the total grant from GEF is USD5,100,000.00, equivalent to
RMB31,620,000.00 yuan.
2.Consolidation Scope of the Financial Statements
Consolidation scope of the financial statements covers the financial statementsof Guangdong Agricultural Pollution Control Project Office (Provincial PMOfor short), 8 project offices of municipal city level and 6 project offices of
county level (hereinafter referred to as PMUs), as well as relevant financialstatements of Guangdong Provincial Finance Department(GDFD for short).
3. Accounting Policies
3.11he Financial Statements of the project were prepared according to the
requirements of Accounting Methods for the World Bank FinancedProject (Caijizi [2000]No.13).
3.2 In accounting practice, the Gregorian calendar year is adopted as the fiscalyear from January I to December 3 1.
3.3 The accrual basis and the debit/credit double entry bookkeeping method are
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adopted. RMB is used as the recording currency of bookkeeping.
3.4 The exchange rate adopted in the financial statements was the exchange rateon December 31, 2015 of the People's Bank of China, which is USD1-RMB6.4936 yuan.
4. Explanation of Subjects
4.1 Project ExpendituresThe project expenditure in 2015 was RMB66,333,259.34 yuan, and thecumulative expenditures were RMB84,357,951.90 yuan, which accounted for6.3 8% of the total investment plan.
(currency unit: RMB yuan)
Project Component Name Current-period Expenditure Cumulative Expenditures
Capacity Building and Knowledge 8,658,741.20 12,908,533.02
Management
(4) Project Management 4,442,118.95 7,065,887.78
(5 ) Front-end fee 93,650.00 1,623,400.00
Total 66,333,259.34 84,357,951.90
4.2 Cash and BankOn December 31, 2015, the balance was RMB14,799,568.72 yuan. Thereinto,balance of account of Provincial PMO was RMB549,654.62 yuan, total balanceof accounts of municipal and county PMUs was RMB 2,882,606.06 yuan andbalance of the special account of GDFD was USD1,750,540.23, equivalent toRMB 11,367,308.04 yuan.
4.3 Prepaid and ReceivableThe balance on December 31, 2015 was RMB46,874,355.39 yuan, mainlycounterpart funds of RMB46,811,529.39 yuan that should be refunded byGDFD. By December 31, 2015, the balance of provincial financial counterpartfunds was RMB58,514,411.74 yuan. According to the Notice on the adoptionof accrual basis for the recording of the year 2015 balance in the budgetunits(Yuecainong [2016]No. 14) , GDFD confirmed a refund ofRMB46,811,529.39 yuan in 2016.
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4.4 Project Appropriation FundsThe balance on December 31, 2015 was RMB82,940,017.73 yuan, amongwhich provincial counterpart fund was RMB72,911,317.65 yuan , smallholderfarmers' investment was RMB48,800.00 yuan and livestock farms' counterpartfund was RMB9,979,900.08 yuan.
4.5 Project LoanThe balance on December 31, 2015 was RMB47,078,600.00 yuan, which wasthe IBRD loan USD7,250,000.00(including front-end fee ofUSD250,000.00) ,equivalent to RMB47,078,600.00 yuan.By December 31, 2015, accumulative USD7,250,000.00 of World Bank loanhad been withdrawn, accounting for 7.25% of the total.
4.6 GEF GrantThe balance on December 31, 2015 was RMB8,339,473.46 yuan, which wasGEF Grant USD1,284,260.42, equivalent to RMB8,339,473.46 yuan.By December 31, 2015, accumulative USD1,284,260.42 of GEF Grant hadbeen withdrawn, accounting for 25.18% of the total.
4.7 PayableOn December 31, 2015, the balance was RMB7,662,749.71 yuan, among whichthe payable of RMB4,134,968.27 yuan of civil works payments to livestockfarms, payable of RMB253,350.00 yuan for equipment procurement and otherpayable of RMB3,274,431.44 yuan.
4.8 Retained EarningsThe balance on December 31, 2015 was RMB11,035.11 yuan, which was theinterest income of bank deposit. Interest income of account of Provincial PMOwas RMB2,215.31 yuan and the total interest income of special account ofGDFD was USD1,358.23 (including USDI,168.77 from the special accountfor the loan and USD204.46 from the special account for the grant, deductingUSD15.00 of service charges of special account for the grant which had notbeen withdrawn), equivalent to RMB8,819.80 yuan.
5. Special AccountThe project loan (GEF) special account is set in GDFD. The Special Account ofthe Loan, opened on December 30, 2014, is set in Guangzhou Beijing RoadBranch, Industrial and Commercial Bank of China, with the account number of3602000929200467566, and USD as currency Unit. The Special Account ofGEF grant, opened on January 15, 2015, is set in Guangzhou Linhezhong RoadBranch, Agricultural Bank of China, with the account number of
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44057014040000021.The beginning balance of loan special account of 2015 was zero. The totalamount deposited this year by World Bank was USD7,000,000.00(Prepayment).Interest income was USD1,168.77 and the amount withdrawn this year wasUSD5,973,721.84(amount withdrawn but not yet claimed at the end of thisyear). The ending balance was USD1,027,446.93.The beginning balance of GEF special account of 2015 was zero. The totalamount deposited this year by World Bank was USD1,284,260.42(includingprepayment of USD800,000.00). Interest income was USD204.46 and theamount withdrawn this year was USD561,356.58(including USD484,260.42deposited by the World Bank and USD77,096.16 withdrawn but not yetclaimed at the end of this year ). There was service charges of USD15.00 notwithdrawn this year and the ending balance was USD723,093.30.
6. Other Explanation for the Financial StatementsAccording to the Management Measures on the Provincial Counterpart Fundfor the Guangdong Agricultural Pollution Control Project Financed by theWorld bank (Yuecainong [2014]No.32) enacted by Finance Department andAgricultural Department of Guangdong Province, the provincial counterpartfund budget is allocated to Guangdong Agricultural Investment Center(GAIC)which is in charge of fund appropriation and compiling the departmentalfinal accounts on behalf of the Provincial PMO. To meet the requirements ofthe compilation of the year-end final account, apart from the MIS financialaccounts system which was set up according to the World Bank Loan ProjectFinancial Management Regulations, the Provincial PMO also set up an NCfinancial system according to the accounting regulations for institutions torecord the provincial counterpart fund(the zero balance account as well as thebasic account included). The source documents are being stored into the NCsystem while the MIS system saves the copies of the bank bills andreimbursement documents.
According to Feasibility Study Report, the subsidies for the municipal andcounty project management is included in the annual budget of the counterpartfund of the provincial project office and will be allocated to the project officesof municipal and county level. Since the municipal and county project officesare not eligible to be the legal person hence are unable to open project account,the accounts of the Agricultural bureau or Agricultural technique promotioncenters of the same levels have to be used instead, which causes the cashmanagement and accounts treatment to be done in a special way.