Supreme Audit Office 0Government of Islamic Republic of Afghanistan

INDEPENDENT AUDITORS' REPORT

ToThe Presidentof the Government of Islamic Republic of Afghanistan {

Report on the Financial Statements

1. We have audited the accompanying statements of Cash Receipts and Paym

Statements") of the Capacity Building for Result Facility Project World Bank Project19tVhi3845,

Grant Number TF 11447, (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 Standards

"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 which are 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 Supreme Audit Institutions

(INTOSAI) standards. These 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

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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 the risk assessments, i ery9 eo,4 Qis

relevant to the entity's preparation and presentation of financial statements are d

to design audit procedures that are appropriate in the circumstances, but no f

expressing an opinion on the effectiveness of internal controls. An audit also inti s eva

appropriateness of accounting policies used, the reasonableness of accountin

management, as well as evaluating the presentation of the financial statements * A 6

6. We believe that the audit evidence obtained by us is sufficient and appropriate f0-4LJ Fr

basis for our opinion.

Opinion

7. In our opinion, the Financial Statements present fairly, in all material respects, cash receipts and

payments of the Capacity Building for Result Facility Project World Bank Project ID P123845, Grant

Number TF011447, for the year ended 30 Qaws of Solar Year 1394 (22 December 2014 to 21

December 2015) in accordance with International Public Sector Accounting Standards "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 Grant

Agreement No. TF11447, entered on 21 January 2012 between the Islamic Republic of Afghanistan

and the International Development Association acting as administrator of grant funds provided for

the provision of USD One Hundred million (USD 100,000,000) funding to the Project.

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 Agreement. This responsibility includes performing procedures to obtain

audit evidence about whether all cash payments and receipts are in compliance with the terms and

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conditions of Financing Agreement. Such procedures include the assessment of the risks of material

non-compliance.

10. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a

basis for our opinion on compliance.

Opinion on Compliance

11. In our opinion, in all material respects, the activities, financial trans I ton

reflected in the financial statements are in compliance with the terms an ditio

Agreements. of C

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 disclosed to the Ministry in the management letter

relating to the audit of the Solar Year 1394. These obser - ommendations, all of which

have been discussed with the Ministry, are inte ed to improve internal ntrol or result in other

operating efficiencies.

D o ammad Sharif "Sharifi"itor General of Afghanistan

Supreme Audit OfficeKabul, Afghanistan

June 2016

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Islamic Republic of Afghani

Capacity Building for Results Facility Project(World Bank Reference: Project ID P123845; Grant ID 11447)

Financial Statements for the year ended

30 Qaws 1394 (21' December, 2015)

Capacity Building for Results Facility Project

World Bank Reference: Project 1D P123845; Grant ID 11447

STATEMENT OF CASH RECEIPTS AND PAYMENTS

FOR THE YEAR ENDED 30 QAWS 1394 (21 DECEMBER 2015)

1394 1393 CumulativeTo Date

ReceiptsiPayments PaymentsControlled by Third

by entity Parties Total Total

USD USD USD USD USD

RECEIPTS

Initial Advance '- 25,000,00

Replenishments 5,995,717 5 18,427,583

TOTAL RECEIPTS 5,995,717 -17 43,427,580

PAYMENTS

Disbursement Category:Iods, Non-Consulting Serveies, Consultants'

-vices, Payment of CBR's Recruits, 7,277,639holarships, Training & Workshops, Incremental

Operating CostsBank Charges 675 675 675 2,25

TOTAL PAYMENTS 7,278,314 7,278,314 6,252,569 21,550,223

Excess/(Deficit) of Receipts over Payment (1,282,597) (1,282,597) (26,640) 21,877,357

Taminat (Net) 2,725 2,725 2,7

ncrease/(Decrease) in Cash & Cash Equivalents (1,279,872 - (1,279,872) (26,640) 21,880,082

Cash and Cash Equivalaents at the beginning of

the year 23,159,954 - 23,159,954 23,186,594

1ncrease/(Decrease) in Cash & Cash Equivalents (1,279,872) - (1,279,872) (26,640)

Cash and Cash Equivalents at the end of the year 21,880,082 - 21,880,082 23,159,954

The accompanying notes form an integral part of this financial statement.

M. Mustafa MastoorDeputy Minister for FinanceMinistry of Finance, Islamic Republic of Af an ean

Dated: April 30, 2016

Capacity Building for Results Facility Project

(World Bank Reference: Project ID P123845; Grant ID 11447)

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 QAWS 1394 (21 DECEMBER 2015)

1) LEGAL STATUS AND ACTIVITY

a) The Capacity Building for Results Facility Project grant agreement was set up on January 21,

2012. The project's objective is to assist Government-of Afghanistan in improving the capacity and

performance of select line ministries in carrying out their mandates and delivering-services

b) The project is funded by a grant bearing reference number 1 e fghanistan

Reconstruction Trust Fund (ARTF) in the amount of United States Do r000.

c) The project consists of the following parts:

i) Technical Assistance for Preparation and Implementation of Lr u ng

programsii) Building Human Resourcesiii) Civil Service Training

iv) Project management, Monitoring and Evaluation

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 Development Grant Agreement signed between the Government of the Islamic Republic of

Afghanistan and the International Development Association (acting as administrator of ARTF) in

January 2012.

2) SIGNIFICANT ACCOUNTING POLICIES

a) Basis of PreparationThe 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) 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 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 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.

Capacity Building for Results Facility Project(World Bank Reference: Project ID P123845; Grant ID 11447)

d) 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 temporary loan received from government's own IT wlwrnt of such

temporary loan would be refunded in due course when the funds ar g e donor.

b) Bank Charges

The Ministry of Finance has negotiated with Da Afghanistan Ban t r It not be

charged on the transactions in the US Dollar Special bank accoun Charges

may be levied by intermediary banks on deposits into the Special Acc XCL6sAturned

to the World Bank.

c) AppendicesThe accompanying appendices provide additional information and analysis and form an integralpart of these notes, except as indicated otherwise.

d) Others

i) 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.

Capacity Building for Results Facility ProjectWorld Bank Reference: Project ID P123845; Grant ID 11447

APPENDIX Al

SUMMARY OF WITHDRAWAL APPLICATIONSFOR THE YEAR ENDED 30 QAWS 1394 (21 DECEMBER 2015)

Description Application Number Initial Advance Amount

USD USD

DA-A 89 . 228,45DA-A 88DA-A 87DA-A 86 96DA-A 85DA-A 84DA-A 83DA-A 82DA-A 81DA-A 80DA-A 79 -446,589DA-A 77 280,659DA-A 78 151,804DA-A 76 179,158DA-A 75 449,930DA-A 74 158,365DA-A 73 154,036DA-A 71 215,334DA-A 72 201,814DA-A 70 297,320DA-A 69 99,894DA-A 68 85,369DA-A 67 91,603DA-A 66 122,249DA-A 65 203,259DA-A 64 428,917DA-A 63 143,641

Capacity Building for Results Facility ProjectWorld Bank Reference: Project ID P123845; Grant ID 11447

APPENDIX A2

US Dollar SPECIAL ACCOUNT SUMMARYFOR THE YEAR ENDED 30 QAWS 1394 (21 DECEMBER 2015)

Account No: 27442Depository Bank: Da Afghanistan Bank (DAB)Address: Kabul

Opening Balance as per Bank Statement 1 9,954

Add:Replenishment ,717

Total Additions 0 717

Deduct:Payments for Project Expenditure 7,274,914Bank Charges 675

Total Deductions 7,275,589

Closing Balance as per B.S 30 QAWS 1394 (21 DECEMBER 2015) 21,880,082

Capacity Building for Results Facility ProjectWorld Bank Reference: Project ID P123845; Grant ID 11447

APPENDIX A3US DOLLAR SPECIAL ACCOUNT RECONCILIATION

FOR THE YEAR ENDED 30 QAWS 1394 (21 DECEMBER 2015)

Account No: 27419Depository Bank: Da Afghanistan Bank (DAB)Address: Kabul

USD

Closing Balance as per bank statement - 30 QAWS 1394 (21 DECEMBER 2015 1U880,082

Closing balance as per financial statements - 30 QAWS 1394 (21 DECEMBER 41 )21088,0,082

Capacity Building for Results Facility ProjectWorld Bank Reference: Project ID P123845; Grant ID 11447

APPENDIX A4COMPONENT-WISE DISBURSEMENTS

FOR THE YEAR ENDED 30 QAWS 1394 (21 DECEMBER 2015)(not an integral part of the Financial Statements)

1393 1394 Cumulative

Project Component Actual Actual To Date

USDTechnical Assistance for Preparation and Implementation ofLine Ministry Capacity Building programs 588,198 6,857,974Building Human Resources 4187,29 t' 1,305,320

Civil Service Training 324,7 523,302

Project management, Monitoring and Evaluation

TOTAL PAYMENTS 6,251,8 4 ,547,998

Capacity Building for Results Facility ProjectWorld Bank Reference: Project ID P123845; Grant ID 11447

APPENDIX ASSTATEMENT OF ESTIMATED GRANT AMOUNT

FOR THE YEAR ENDED 30 QAWS 1394 (21 DECEMBER 2015)(Memorandum Statement -not an integral part of the Financial Statements)

Amount

In currency of commitmentAmount of Grant USD 100,000,000Amount disbursed by World Bank untill the end of 13941 USD 43,427,580Undisbursed Balance USD 56,572,420

In reporting currencyAmount disbursed by World Bank untill the end of 1394' 43,427,580Equivalent US Dollars for undisbursed amount 56,572,420

Total estimated amount of Grant Funds available 1000,000

Cumulative Payments for expenditure as per the Statement of Cash Receipts & Pay Lt V'4e 121,550,223

1 Actual amounts of total disbursement made by the World Bank since the beginning of the project as available fromClient Connection