financial attest audit report - World Bank Documents

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FINANCIAL ATTEST AUDIT REPORT

ON THE ACCOUNTS OF

JOBS AND COMPETITIVENESS PROGRAM Loan No. 8600-PK

WORLD BANK

PLANNING AND DEVELOPMENT DEPARTMENT,

GOVERNMENT OF THE PUNJAB

For The Financial Year 2016-17

Auditor General of Pakistan Islamabad

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TABLE OF CONTENTS

List of abbreviations

Preface

PART-I

Project Overview

Auditor ' s Report

Financial Statements

PART-II

MANAGEMENT LETTER

COVERING LETTER TO THE MANAGEMENT LETTER

EXECUTIVE SUMMARY

1. Introduction

2. Audit Objectives

3. Audit Scope and Methodology

4. AUDIT FINDINGS AND RECOMMEND A TIO NS

4.1 Organization and Management

4.2 Financial Management

4.3 Procurement and Contracting

4.4 Overall Assessment

5. CONCLUSION

ACKNOWLEDGEMENT

1

Page No.

2

3

4

5

6

7

8

9

10

11

12

12

12

12-21

22

23

24

AG

DG

ECNEC

EPD

GoPb

IPSAS

INTOSAI

ICRU

ISSAI

J&C

LO

MTDF

MoU

PC-1

PAD

PFR

PLRA

PRMP

SDAC ,..

Abbreviations and Acronyms

Accountant General

Director General

Executive Committee of the National Economic Council

Environment Protection Department

Government of the Punjab

International Public sector Accounting Standards

International Organization of Supreme Audit Institutions

Investment Climate Reform Unit

International Standards of Supreme Audit Institutions

Jobs and Competitiveness Program

Lahore (Cost Centres)

Medium Term Development Framework

Memorandum of Understanding

Planning Commission Form no. I

Project Appraisal Document

Punjab Financial Rules

Punjab Land Record Authority

Punjab Resource Management Program

Special Departmental Accounts Committee

2

PREFACE

The Auditor General of Pakistan conducts audit, in terms of articles 169 and 170 of the

Constitution of the Islamic Republic of Pakistan, 1973, read with Sections 7, 8 & 12 of the

Auditor General's (Functions, Powers and Terms & Conditions of Service) Ordinance, 2001.

This audit of Financial Statements of the Jobs and Competitiveness (J&C) Program financed by

Government of the Punjab and the World Bank for the financial year 2016-17 was carried out

according! y.

The Directorate General Audit, Punjab Lahore conducted audit of the J&C during

September, 2017 for the financial year 2016-17 with a view to report significant findings to

stakeholders. Audit examined the economy, efficiency and effectiveness aspects of the J&C. In

addition, audit also assessed, on test check basis, whether the management complied with

applicable laws, rules and regulations in managing the entity. The audit report indicates specific

actions that, if taken, will help the management realize the intended objectives. The report has

been discussed with the J&C Management in September, 2017.

The report consists of two parts i.e. Part-I contains Auditor's Report (Audit Opinion) and

Financial Statements and Part-II consists of Executive Summary, Management Letter and Audit

Findings.

The report has been prepared for submission to the World Bank in terms of agreement.

Dated:

Place: Lahore.

3

Director General Audit,

Punjab, Lahore

PART-I

1- Project Overview

2- Auditor's Report to the Management

3- Financial Statements

4

Name of the Project

Sponsoring Authority

Executing Agency

Loan No.

Principal Loan Amount

Date of Commencement

Actual Date of Commencement:

Date of Completion

Grant Utilization Status:

PROJECT OVERVIEW

Jobs and Competitiveness Program

World Bank


IBRD-86000

USD 100 million

31-03-2016

17-06-2016

30-06-2021

5

Amount utilized during

2016-17(Rs.)

2,574,017,771

AUDITOR'S REPORT

Auditor's Report on J&C Financial Statements

We have audited the accompanying Financial Statements of Jobs and Competitiveness

Program that comprises of Statement of Recei ts and Payments, Statement of Comparison of

Budget and Actual together with the notes forming part thereof for the year ended 3<P June,

2017.

Management's Responsibility

It is the responsibility of Project Management to establish and maintain a system of

internal control, and 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 Standard.

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 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.

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 301h June, 2017 in accordance with IPSAS

Cash Basis of Accounting Standard.

(b) The expenditure has been incurred in accordance with the requirements of legal

agreement.

Matter of Emphasis It is emphasized that the recruitment process of J&C and its implementing agencies is not

as per relevant rules and regulations and notable violations have been found during audi t of

selected implementing agencies which requires special attention of the management.

Place: Lahore

Dated:

6

~ (Fareed Mahmood Ch.)

Director General

Audit, Punjab, Lahore

FINANCIAL STATEMENTS

FOR THE YEAR ENDED ON 3QthJUNE, 2017

7

Jobs and Competitiveness (J&C) Program

IBRD Credit No. 86000

Statement of Cash Receipts and Payments

RECEIPTS Government of the Punjab External Asistance

TOTAL RECEIPTS

PAYMENTS


Target Departments and IAs

Board of Revenue

Environment Protection Department

Faisalabad Industrial Estates Management Company Industries , Commerce and Investment Department

Investment Climate Reform Unit Lahore High Court

Punjab Information Technology Board (Starting a Business)

Cluster Development Initiative

Punjab Small Industries Corporation (Grant in Aid) Punjab Small Industries Corporation (Gandhara Art Village) Punjab Small Industries Corporation

Punjab Small Industries Corporation (Est of Metal Craft Artisan Village)

Punjab Small Industries Corporation (Est. of handicraft development center) Punjab Small Industries Corporation (Research and Publication of Books)

Punjab Small Industries Corporation (Development of infrastructure Small Industries Estate)

Urban Unit


TOTAL PAYMENTS

Increase/ (Decrease) in Cash Cash at Beginning of Year Cash at End of Year

For the Year Ended June 30, 2017

Note

5 6 / 6.1

LZ4841

LQ4077

L016000255

LQ4087

LZ4838

L016003213

LE4697

L017000030

LQ4224

L015002097

L015002097

L015002096

L015002099

L015002103

L013000016

L014000130

L001001359

Amount in Pak Rupees 2016-2017

Receipts/ Payments

under Program

2,574 ,017,771

2,574,017,771

2,935,000

3,714,787

28 ,005,000

6,978,000

15,564 ,015

17,937 ,000

2,328,865

52 ,545 ,523

1,394 ,723,000

52 ,272,000

270,324,000

74,340,000

7,890 ,000

4,175,999

47 ,957 ,000

499 ,854 ,278

92,473 ,304

2,574,017,771

Payment by Third Parties

IOI

* The accompanying notes form an integral part of these financial statements .

Amount in Pak Rupees 2015-2016

Receipts/ Payments

under Program

N/A

N/A

NIA

N/A

N/A N/A

N/A

N/A

N/A

NIA

Payment by Third Parties

ID

N/A

N/A

N/A

N/A

N/A

NIA

N/A

N/A

NIA

NIA

** Amounts mentioned above have been reported by respective IA and TD to PRMP through submission of Budget

Reports for FY 2016-17 ***As per PAD, following LO codes have been added for development expenditure L015002097, L015002096,

L015002099 , L015002103, L013000016 , L014000130

Dl:f:f, Punjab Resource Management Program

~-=---- Financial Management Specialist



Statement of Budgeted and Actual Amount


Amount in Pak Rueees 2016-17

Revised Estimates

Amount in Pak Rueees 2015-1 6

Revised Estimates

Fund Centre 2016-171 Budgeted Actual Amount 2015-161 Budgeted Actual Amount

Amount Amount

RECEIPTS Government of the Punjab 2.983.992.~00 I 2,574 ,017,771

11 11 External Asistance

TOTAL RECEIPTS 2,983,992,000 2,574,017,771

PAYMENTS


Target Depts and IAs

Punjab Land Records Authority LZ4841 89,769,000 2,935,000 NIA

Environment Protection Department LQ4077 50,000,000 3,714,787 NIA

Faisalabad Industrial Estates Management L016000255 50,000,000 28,005,000 NIA

Company Industries, Commerce and Investment LQ4087 Department

13,000,000 6,978,000 NIA

Investment Climate Reform Unit LZ4838 30,000,000 15,564,015 NIA

Lahore High Court L016003213 144,077,000 17,937,000 NIA

Punjab Information Technology Board (Starting LE4697 7,490,000 2,328,865 NIA

a Business)

Cluster Development Initiative L017000030 133,245,000 52,545 ,523 NIA

Punjab Small Industries Corporation (Grant in LQ4224 1,394,723,000 1,394,723,000

Aid)

Punjab Small Industries Corporation (Gandhara L015002097 52,272,000 52,272,000

Art Village)

Punjab Small Industries Corporation L015002096 270,324,000 270,324 ,000

Punjab Small Industries Corporation (Est of L015002099 74 ,334,000 74,340,000

Metal Craft Artisan Village)

Punjab Small Industries Corporation (Est. of L015002103 16,446,000 7,890,000

handicraft development center)

Punjab Small Industries Corporation (Research L013000016 10,355,000 4,175,999

and Publication of Books)

Punjab Small Industries Corporation (Development of infrastructure Small Industries L014000130 47,957,000 47 ,957,000

Estate)

Urban Unit L016001442 500,000,000 499,854,278 NIA

Punjab Resource Management Program L001001359 100,000,000 92,473,304 NIA

TOTAL PAYMENTS 2,983,992,000 2,574,017,771

• The accompanying notes form an integral part of these financial statements.

•• Amounts mentioned above have been reported by respective IA and TD to PRMP through submission of Budget Execution

Reports for FY 2016-17 ... As per PAD, following LO codes have been added for development expenditure L015002097 , L015002096, L015002099, L015002103,

L013000016, L014000130

Audit Officer Directorate General Audit

,Vvf~ Deputy Program Director


Financial Management Specialist


NIA

NIA

NIA

NIA

NIA

NIA

NIA

NIA

NIA

NIA



Notes to the Financial Statements


Program (J&C) Description

1.1 Introduction

The Financial Statements are for Jobs and Competitiveness (J&C) program. The financial statements encompasses the

reporting entity as defined in the Financing Agreements between the Islamic Republic of Pakistan and the World Bank for

the program. The Financing agreement of US$ 100 million (IBRD Credit No.86000-PK) was approved on 31st March

2016.

1.2 Program Objectives

The J&C program is designed to improve governance outcomes related to the business environment in the province and

to improve investment outcomes related to infrastructure. PRMP is responsible for overall program coordination . The

financing instrument used for this Program is Performance for Results (PforR), which is relat ively new in Pakistan. PforR

instrument supports government's existing programs and systems.

1.3 Program Scope

The disbursement is linked with achievement of certain agreed results called Disbursement Linked Results (DLRs) and

disbursement is made directly to Finance Department after submission of report validated by third party firm . There is no

"Eligible Expenditure Program (EEP) in this instrument. However, an "Expenditure Framework (EF)" has been prepared

which may be viewed in the Program Appraisal Document (PAD), wherein, some selective cost centers /ODO

codes/expenditure themes (both from current and development side) of target departments and implementing agencies

have been included on the basis of five year expenditure projections. Accountant General Punjab makes payments and

maintain accounting records of cost centers/ODO codes mentioned in EF using the government financial management

information system/PIFRA System.

1.4 Estimated Cost The Program is planned over five years with disbursements up to a maximum of US$100 million equivalent) over this time.

1.5 Sources of Finance 1. World Bank 2. Government of the Punjab

1.6 Components of J&C Program

The J&C program has been designed to improve the general governance environment related to doing business in the

province of punjab. Additionally, the project aims to improve investment outcomes related to investment in infrastructure

and align such investments to requirements as gathered from the Punjab Spatial Strategy.

2 Certification by Project Management on Application of Funds/ Management Assertion :

Funds against IBRD Credit No. 86000-PK have been utilized for the project purposes as defined in the financing

agreement.

3 Accounting Convention and Statement of Compliance

The Financial Statements of J&C program have been prepared in accordance with Cash Basis International Public Sector

Accounting Standards (IPSAS), Financial Reporting under the Cash Basis of Accounting . These financial statements have

been prepared using cash basis of accounting where transactions are only recognized when cash is received or paid .

4 Significant Accounting Pol ic ies :

4.1 Foreign Currency Transaction :

Cash receipts and payments arising from transactions in foreign currency are recorded in Pak Rupees by applying the

exchange rate prevailing at the date of transactions .

4.2 Reporting Currency : All amounts in the financial statements are in Pak Rupees.

4.3 Revenue Recognition :

Revenue is recognized on the date of receipt of money by bank or clearance of cheque. Revenue is recognized on gross

basis and any related costs are recorded separately

4.4 Recogn ition of Expenditure :

Expenditure is recognized on the date when payment is made or cheque is issued. Financial year to which the payments

pertain is determined by the date on which a cheque or payment advice is issued .

4.5 Basis of Presentation The financial statement has been prepared in accordance with International Public Sector Accounting Standard (IPSAS)

cash basis .

4.6 Accounting Convention These financial statements have been prepared under the historical cost convention with cash basis of accounting.

Accordingly, expenses are recognized when paid rather incurred.

4.7 Foreign Currency Transactions

All transactions have been made in Pak. Rupees

4.8 Fixed Assets Fixed Assets are disclosed on Historical Cost Basis . Schedule of Fixed Assets has been given.

5 Receipts - Government of the Punjab :

This represents the funds provided by Government of the Punjab to pay for the program for the period July 01 . 2016

to June 30, 2017 amounting to PKR 2,983 Million

6 External Assistance :

6.1 No external assistance was disbursed directly to J&C agencies during the financial year. However, an amount of 20.26

USO million approximately was disbursed to Finance Department directly as budgetary support in FY 2016-17 as advance

paymenVreimbursement for J&C Program. The amount however, can not be refiected against the external assistance

column under PforR instrument and will be treated as separate amount irrespective of the program. Whereas, funding to

all implementing agencies and target departments will be provided from GOPb funds as per government's rules and

procedures.

Funding Mechanism: The lending instrument under J&C Program is Performance for Results (PforR). PforR supports government's own

systems and existing programs. As far as funding of the program is concerned, as mentioned in Program Appraisal

Document (PAD), program funding will be included in the provincial annual budget following the regular budget cycle and

all funding will fiow through distinct budget line items . Whereas, each Implementing Agency (IA) will maintain its own books

of accounts for program related activities on cash basis , using the government's accounting policies and procedures. The

figures mentioned in the financial statements have been reported by respective Implementing Agencies and Target

Departments to PRMP through submission of quarterly budget execution reports for FY 2016-17 and through AG Office's

PIFRA financial system clarified/duly reconciled with AG/Treasury Offices by respective IAs and TDs whereas , PRMP has

compiled the same figures in form of financial statements for FY 2016-17.

Implementing Agencies are Targeted Departments :

There are a total of 15 implementing agencies and targeted departments. As provided in PAD, all implementing agencies

and target departments are getting funding in their respective regular budget line from Finance Department in the agreed

ODO codes/LQs as agreed in the Expenditure Framework both from development and current side. The Program funding

to all !As and TDs comes from Government of Punjab only whereas World Bank releases the loan amount directly to

Finance Department as budgetary support subject to achievement of agreed DLRs duly validated by third party firm .

Since, in J&C, funds fiow directly from Finance Department through distinct budget lines to IAs and TDs each having their

own Drawing and Disbursing Officers (DD0s) and Principal Accounting Officers (PAOs) legally authorized for accounting

controls and audit observations as per government's policies and rules ; therefore, expenditures, payments, procurements

and other associated activities are the responsibility of these respective entities. It is pertinent to mention here that under

PforR instrument, World Bank does not provide any funding directly to implementing agencies or target departments and

instead the Program is funded by Government of Punjab using its own sources, while on achievement of DLRs verified by

third party, funds from the World Bank fiow to Finance Department as per disbursement framework.

6.2 There has been no instance of non compliance with the terms and conditions of the Financing Agreement between the

World Bank and GoP which have resulted in cancellation of loan.

7 Authorization for Issue : These financial statements have been authorized for issuance by the management of J&C (PRMP).

8 General : Figures have been rounded off to the nearest rupee.

9 Payments : PMU/PRMP received funds from Government of the Punjab through assignment account which is lapsable.

~ ~ Directorate General Audit

Deputy Program Director


~~ Financial Management Specialist


Expenditure Statement F.Y 2016-17 -Sr. Revised Consumption I•

No. Description

Budget (30.06.2017) Balance

f ., -

1 Establishment cost 36,825,368 34,822,490 2,002,878

2 Honorarium & Internship 66,667 ( 66,667 -

3 Rent of Building 5,760,000 5,760,000 -

4 Furniture & Fixture 64,935 ~ 64,935 -

5 Machinery & Maintenance 2,213,521 2,177,771 35,750

6 Purchase of Vehicles 4,200,000 - '' - 4,200,000 POL Charges/ Maintenance of '

7 vehicle 2,393,455 1,885,180 508,275

8 Office Automation 501,864 501,546 318 -;~~.i.'

9 Stationary + Postage etc. 1,170,000 1,143,952 26,048

10 TA/DA 145,414 ,, ~t 137,114 8,300

11 Telephone Charges 432,569 412,604 19,965

12 Cost of Utilities 612,342 . 610,725 1,617

13 Newspaper & Periodicals 103,027 ,. • I; 98,950 4,077 ,:.::

14 Cost of Workshops 60,000 ;. •,, 49,725 10,275 . _;,;,' . .',

15 Rates & Taxes 65,750 25,620 40,130 ~

16 Entertainment 158,351 ~

105,714 52,637 . ;,

17 Miscellaneous / Others 243,287 !'• ..••. 184,891 58,396 •,,

18 Consultancies 44,812,350 44,273,386 538,964

19 Training/CB Programs 121,100 71,100 50,000

20 Printing and Publishing 50,000 .. 26,277 23,723 -

Total Cost 100,000,000 92,473,304 7,526,696

Reconciliation of Assignment Account {Local Currenc)l}

{Assignment Account No.45 maintained in NBP Main Branch 1 Lahore}

Description Pak Rs.

Opening Balance on 01 .07 .2016 NIL

Less: NIL

Add: 150,000,000.00

Issued Cheques Cancelled NIL

Direct Payments NIL -

Surrendered During F.Y. 2016-17 (50,000,000.00)

Total (Revised Allocation) 100,000,000.00

Expenditures for the year 2016-17 92.473,304.00

Balance as on 30.06.2017 7,526,696.00

Amount Lapsed on 30.06.2017 7,526,696.00

Closing Balance as per bank statement on NIL 30.06.2017

Punjab Resource Management Program (PRMP) Grant No.22036 Financial Statements For the Year Ended June 30, 2016

Schedule of Fixed Assets PMU/PRMP

Financial Year 2015-16

Category Nos. Location

Machineri & Maintenance

Fax 3 PMU/PRMP

Server 2

Heavy Duty UPS for Server 2 . Laptop Computers (IBM, Sony7Toshiba) 15 PDA (Personal Digital Assistant)/ Pocket PC/ Black

Berry Devices 3

Computer(branded) width Superdrive & Flat Screen

TFT Monitors 19

Heavv Duty Laser Printer B&W Duplex/ Network 1

Heavy Duty Color Laser Printer Duplex/ Network 1

UPS 37

Laser jet Printer 10

Inkjet printer HP 1

Photocopier 2

Multimedia projector with Screen 3

Diqital Camera SLR 1

Video Camera 1

DVD Recorder+ VCR 1

Audio Visual Peripheral Accessories for AV section 1

Scanner 3

CCTV Cameras 5

TV Set + LED + LCD 3

Overhead Projector 1

External USB Bc1ckup Drive 1

Paper Shredder 1

Air cond.(Split) 17 PMU/PRMP

Air Cooler 1

Refrigerator 1

Microwave 1

Heavy Duty Stabilizer 3

Generator(30 KVA) 1

Vacuum Cleaner 1

Water Filter 1

Pedestal fan 8

Bracket Fan 24

Water Dispenser 3

Vehicles

Vehicles (1300 cc) 6 PMU/PRMP

Vehicles (1000 cc) 4

Vans 2

Suzuki Carry van 1

Motorcycle (70 cc) 2 . . , -

Furniture & Fixture

Working Counters 23 sft PMU/PRMP

Officer Table 1