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RLD BANK PROJECTS.AR ENDED 21 DECEMBER 2017
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Supreme Audit OfficeGovernment of Islamic Republic of Afghanistan
lui tiers Reporti
To, Date: August 2018HEMinister of Finance,Government of Islamic Republic of AfghanistanKabul
Independent Auditors' Report on the Financial Statements
I. We have audited the accompanying statements of Cash Receipts and Payments (the"Financial Statements") of the Afghanistan New Market Development Project bearingWorld Bank Project ID number Pi1l8053 financed tinder Grant Number 116800-AF(hereinafter referred to as the "Project") for the year ended 30 Qaws of Solar Year 1396(21 December 2016 to 21 December 2017), and a summary of significant accountingpolicies and other explanatory notes forming part of the Financial Statements.
The Ministry of Finance's Responsibility for the Financial Statements and Compliancewith Grant Agreement
2. [he Ministry of Finance (the "Ministry") is responsible for preparation and fair presentationof the Financial Statements in accordance with International Public Sector Accountin-Standard "Financial Reporting tinder the Cash Basis of Accounting." [his responsibilityincludes designing, implementing and maintaining internal control relevant to thepreparation and fair presentation of the financial statements which are free from materialmisstatement, whether due to fraud or error: selecting and applying appropriate accountingpolicies: and making accounting estimates that are reasonable in the circumstances.
3. In addition, the Ministry is also responsible for ensuring that the activities, financialtransactions and information reflected in the financial statements are in compliance with theProject's Grant Agreement. The Grant Agreement Number 11680-Al dated 13 July 2011entered into between the Islamic Republic of Afghanistan and the international
Development Association for the provision of Fourteen Million Special Drawing Rights(SDR 14,000,000) funding to the Project.
Auditor's Responsibility
4. Our responsibility is to express an opinion on these Financial Statements based on our audit.We have conducted audit of the financial statements, project operations and related internalcontrols in accordance with International Standards of Supreme Audit Institutions("ISSAls"). Those Standards require that SAO comply with ethical regulations and planand perform the audit to obtain reasonable assurance of the financial statements being freeFrom material misstatement. Those standards require that SAO express its opinion onwhether the financial statements present fairly, in all material respects, the cash receipts andpayments of the project.
5. In addition to the responsibility to express an opinion on the financial statements describedabove, our responsibility includes expressing an opinion on whether the activities, financialtransactions and information reflected in the financial statements are, in all material respects,in compliance with the Project's Grant Agreement. This responsibility includes performingprocedures to obtain audit evidence about whether all payments and receipts are incompliance with the terms and conditions of Grant Agreement.
6. An audit involves performing procedures to obtain reasonable and appropriate auditevidence about the amounts and disclosures in the financial statements. The proceduresselected depend on the auditor's judgement, including the assessment of the risks of materialmisstatement of the financial statements, whether due to fraud or error. In making the riskassessments, internal controls relevant to the entity's preparation and presentation offinancial statements are considered in order to design audit procedures that are appropriatein the circumstances, but not for the purposes of expressing an opinion on the effectivenessof internal controls. An audit also includes evaluating the appropriateness of accountingpolicies used, the reasonableness of accounting estimates made by management, as well asevaluating the presentation of the financial statements.
7. We believe that the audit evidence we have obtained is reasonable and approoriate t0provide a basis for our opinion.
Opinion
8. In our opinion the Financial Statements present fairly, in all material respects, cash receiptsand payments of the Afghanistan New Market Development Project bearing World BankProject ID number Pl18053 financed under Grant Number H6800-AF for the year ended30 Qaws of Solar Year 1396 (21 December 2016 to 21 December 2017) in accordance withInternational Public Sector Accounting Standard "Financial Reporting under the CashBasis of Accounting."
9. In our opinion, in all material respects, the activities, financial transactions and informationreflected in the financial statements are in compliance with the terms and conditions ofProject's Grant Agreement.
10. Management Letter, attached to this Audit Report, highlights areas of improvenient infinancial management including compliance with financial covenants of the GrantAgreenienits and of results of iis operations for the 30 Qaws of Solar Year 1396 (21December 2016 to 21 Deccim ber 2017). These observations and recommendations havebeen coimunicated to and discussed with the Project and are intended to improve internalcontrols and result in other operating efleencies of the Project.
Dr. Moha mad Sharif SharifiAuditor Gle era! of A fghanistan
S reme Audit OfficeKabuL.AIhanistan
4 MioiiecaM)(Al,laisa
Islamic Republic of Afghanistan
Afghanistan New Market Development ProjectWorld Bank Reference: Project ID P118053; Grant I) 116800
Financial Statements for the year ended
3 0 th Qaws 1396 (2 1 st December, 2017)
Afghanistan New Market Development ProjectWorld Bank Reference: Project I) Pl18053; Grant ID H6800
STATEMENT OF CASH RECEIPTS AND PAYMENTSFOR THE YEAR ENDED 30 QAWS 1396 (21 DECEMBER 2017)
1396 1396 CumulativeTo Date
Receipts/Payments PaymentsControlled by Thirdby entity Parties Total Total
USD USD USD USD USD
RECEtPTS
Initial Advance - - - - 1,650,000Replenishment 481 279 - 481,279 3,103,061 14,027,337Direct Payment - - - 2.624,445Temporary loan from governments sources - - - (700,000) -Taxes collected to be transferred (741) - (741) 741 -
TOTAL RECEIPTS 480,538 480,538 2,403,802 18,301,782
PAYMENTS
Disbursement Category:Goods, Works, Non-Consulting Services, Consultant'sServices Training & Workshops and IncrementalOperating Costs 204,132 - 204,132 1,437,976 17,052,324FNMD Cost Sharing Grants - - -
Refund to Donor - - 5,000 5,000Bank Charges 25 - 25 100 775
TOTAL PAYMENTS 204,157- 204,157 1,443,076 17,058,099
Excess of Receipts over Payments 276,381- 276,381 960,726 1,243.683
Tarninat Net) - - - 1,292
increase/(Decrease) in Cash & Cash Equivalents 276,38168 276,381 960,726 1,244,974
Cash and Cash Equivalents at the beginning of theyear 968,593 - 968,593 7,867
Increase/(Decrease) in Cash 276,381 - 276,381 960,726
Cash an Ca4h Equivalents at the end of the year 1,244,974 1,244,974 968,593
Tue cco paying notes forrnan integral part of this financial statement.
Deputy sfor FinarceJliRtty of,FinanLe ]slam\cR epublic of Afghanistan
Dated August 14, )18
Afghanistan New Market Development Project(World Bank Reference: Project ID P118053; Grant ID 116800)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 QAWS 1396 (21 DECEMBER 2017)
1) LEGAL STATUS AND ACTIVITY
a) The Afghanistan New Market Development Project grant agreement was set up on July 3, 2011,
The project's objective is to help in revitalization of private sector activities in four major urban
cities of Kabul, Mazar-e-Sharif, Jalalabad and Herat through provision of business development
technical assistance to support private firms' initiatives to gain market knowledge, improve product
quality and processing technologies, and increase their presence in both domestic and exportmarkets
b) The project is funded by a grant from the International Development Association bearing number
H6800 in the amount equivalent to Special Drawing Rights (SDR) 14,000,000.
c) The project consists of the following parts:i) Facility for New Market Developmentii) Project Implementation Support and Technical Assistance to Ministry of Commerce and
Industry.
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 requirementsof the Development Grant Agreement signed between the Government of the Islamic Republic ofAfghanistan and the International Development Association in July 2011.
2) SIGNIFICANT ACCOUNTING POLICIES
a) Basis of PreparationThe financial statements are prepared under the historical cost convention and in accordance withCash Basis IPSAS - Financial Reporting under the Cash Basis of Accounting issued byInternational Federation of Accountants (IFAC)-
b) Reporting EntityThese financial statements are for the Project referred to in para 1(a) which is funded by thegrants as specified in para 1(b) and encompass the operations of the project to the extent funded
by those grants.
c) PaymentsPayments 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 onwhich 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.
Afghanistan New Market Development Project(World Bank Reference: Project ID P118053; Grant I D 116800)
d) Reporting CurrencyThe 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.
e) Currency translationsTransactions 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) ReceiptsThese represent grants and aid received during the period.
b) Initial AdvanceInitial advance represents the advance given by the World Bank into the designated bank
account(s) of the project.
c) Bank ChargesThe Ministry of Finance has negotiated with Da Afghanistan Bank that bank charges will not be
charged on the transactions in the US Dollar Special bank account of the grant. Bank Chargesmay be levied by intermediary banks on deposits into the Special Account and balances returned
to the World Bank.
d) Comparison of Budget and Actual AmountsThe Project, being the reporting entity for the purpose of these financial statements, in its capacity
as such does not make its annual approved budget publicly available nor is its budget explicitly
available publicly in the compiled approved budget in a manner purposeful to the context of these
financial statements. Thus, the requirement of presenting a comparison of budget and actual
amounts is not considered contextually applicable.
e) Payments made by third partiesThese represent payments directly made by the World Bank, on basis of requests submitted by
the Ministry of Finance in form of a withdrawal application, towards settlement of the claims,liabilities and contractual obligations against contracts and agreements for eligible expenditures of
the project as per the financing agreement. These payments do not constitute cash receipts or
payments by the entity and as such are disclosed in the "Payments by Third Party" column in the
statement of Cash Receipts and Payments
f) TaminatThe amount of Taminat reported in the FS represents net flow arising from deduction/repayment of
security deposit (retention money) during the reporting period.
g) Authorisation DateThese Financial Statements are authorised by the Deputy Minister for Finance, Ministry of Finance
or any official acting on his behalf who has been so authorised to act on the date endorsed on the
Statement of Cash Receipts and Payments.
Af0hanistan New Market Development Project(World Bank Reference: Project ID P118053; Grant ID H6800)
h) AppendicesThe accompanying appendices provide additional information and analysis and form an integral
part of these notes, except as indicated otherwise.
i) 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 New Market Development ProjectWorld Bank Reference: Project ID P1 18053; Grant ID 116800
APPENDIX AlSUMMARY OF WITHDRAWAL APPLICATIONS
FOR THE YEAR ENDED 30 QAWS 1396 (21 DECEMBER 2017)
InitialDescription Application Number Advance Amount
USD USD
DA-A 35 481,279
Afghanistan New Market Development ProjectWorld Bank Reference: Project I) P118053; Grant I) H6800
APPENDIX A2
US Dollar SPECIAL ACCOUNT SUMMARYFOR THE YEAR ENDED 30 QAWS 1396 (21 DECEMBER 2017)
Account No: 27412Depository Bank: Da Afghanistan Bank (DAB)Address: Kabul
USD
Opening Balance as per Bank Statement 968,593
Add:Replenishment from World Bank 481,279
Total Additions 481,279
Deduct:Payments for Project Expenditure 204,873Bank Charges 25
Total Deductions 204,898
Closing Balance as per B.S 30 QAWS 1396 (21 DECEMBER 2017) 1,244,974
Afghanistan New Market Development Project
World Bank Reference: Project ID P118053; Grant ID H6800
APPENDIX A3
US DOLLAR SPECIAL ACCOUNT RECONCILIATIONFOR THE YEAR ENDED 30 QAWS 1396 (21 DECEMBER 2017)
Account No: 27412
Depository Bank: Da Afghanistan Bank (DAB)Address: Kabul
USD
Closing Balance as per bank statement - 30 QAVVS 1396 (21 DECEMBER 2017) 1,244,974
Closing balance as per financial statements - 30 QAWS 1396 (21 DECEMBER 2017) 1,244,974
Afghanistan New Market Development ProjectWorld Bank Reference: Project ID P118053; Grant ID H6800
APPENDIX A4COMPONENT-WISE DISBURSEMENTS
FOR THE YEAR ENDED 30 QAWS 1396 (21 DECEMBER 2017)(not an integral part of the Financial Statements)
1395 1396 Cumulative To
Project Component DateUSD USD USD
Facility for New Market Development 1,267,056 117,792 15,265,564Project Implementation Support and Technical Assistance toMoCI 170,920 86,340 1,786,760
Bank Charges 100 25 775
TOTAL PAYMENTS 1,438,076 204,157 17,053,099
Afghanistan New Market Development Project
World Bank Reference: Project I) P1 18053; Grant ID H6800
Appendix ASSTATEMENT OF ESTIMATED GRANT AMOUNT
FOR THE YEAR ENDED 30 QAWS 1396 (21 DECEMBER 2017)(Memorandum Statement - not an integral part of the Financial Statements)
Amount
In currency of commitmentAmount of Grant XDR 14,000,000
Amount disbursed by World Bank untill the end of 1396' XDR 12,598,742Undisbursed Balance XDR 1,401,258
In reporting currencyAmount disbursed by World Bank untill the end of 13962 USD 18,296,831Equivalent US Dollars for undisbursed amount3 USD 1,989,786
Total estimated amount of Grant Funds available USD 20,286,617
Cumulative Payments for expenditure as per the Statement of Cash Receipts & Payments USD 17,051,808
1 Actual amounts of total disbursement made by the World Bank since the beginning of the project as available fromClient Connection in XDRs.
2 Actual amounts of total disbursement made by the World Bank since the beginning of the project as available fromClient Connection in US Dollars.
3. The amount of equivalent US Dollars for undisbursed balance of the grant where the currenct of commitment of thegrant is XDR (in the currency of commitment) has been calculated at the exchange rate of 1.42 USD per XDRwhich is the rate published by the World Bank as at last day of the financial year.