Office of the

Special Sectors Audit WingConstitution Avenue

islamabad

No.PA/FAP/KPK/SSAjF- 15/ < Dated: 91 -12-2016

To,

1. The Secretary,Economic Affairs Division,Government of PakistanPak Secretariat, Block "C",Islamabad

L The Country Director,World Bank Resident Mission, 20-A, Shahrah-e-JamhuriatSector G-5/1, Islamabad

Subject: FOREIGN AIDED PROJECTS (APs) AUDIT REPORTS

Financial Attest Audits of the following FAP Audit Reports has been conducted bythis office:

FS.No Name of Projects Development-I Partners

1. Governance Support Pro gran WorldBank(MDTI)

2. Competitive Industries Project for Khyber Pakhtunkhwa World Bank(MDTF)K. Khyber Pakhtunkhwa-Southern Area Development World Bank(MDTF)Project

4. Revitalization and Strengthening the Health Services World Bank(MDTF)

Delivery and Nutrition Services in Crisis Affected

Districts of Khyber Pakhtunkhwa under Public Private

Partnership[

5. Upgradation/Rehabilitation of Road from Chakdara to World Bank(MDTF)

Madyan on the Right Bank of River Swat under

Emergency Road Recovery Project Khyber Pakhtunkhwa

6. conomic Revitalization in Khyber Paklhtunkhwa World World Bank(MDTF)

Batn,MDTF Grant No.TF.99175-Pak

2, Certificate/Financial Attest alongwith the Audit Report containing therein the

management letter (ML) on the same is attached herewith. The referred is hereby issu'd

simultaneously to the Government (to EAD) and to the World Bank Resident Mission

Islamabad.

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FINANCIAL ATTEST AUDIT REPORT

ON THE ACCOUNTS OF

ECONOMIC REVITALIZATIONIN KHYBER PAKHTUNKHWA

WORLD BANKJMDTF GRANT NO.TF-99175

INDUSTRIES DEPARTMENT, GOVERNMENTOF KHYBER PAKHTUNKHWA

FOR THE FINANCIAL YEAR 2015-16

AUDITOR GENERAL OF PAKISTANISLAMABAD

FINANCIAL ATTEST AUDIT REPORT

ON THE ACCOUNTS OF

ECONOMIC REVITALIZATIONIN KHYBER PAKHTUNKHWA

WORLD BANK/MDTF GRANT NO.TF-99175

INDUSTRIES DEPARTMENT, GOVERNMENTOF KHYBER PAKHTUNKHWA

FOR THE FINANCIAL YEAR 2015-16

AUDITOR GENERAL OF PAKISTANISLAMABAD

TABLE OF CONTENTS

Abbreviations and Acronym s,..................................................... 1

Preface.,.......................... -... ... ....... .. .... ..... .... ... ....... ~.. 2

PART-1

Project O verview ................................................................ 3

Auditor's Report to the management (Audit Opinion) ..... ... 4

Financial Statements....... ................... 6

PART-II

COVERING LETTER TO THE MANAGEMENT ................ 18

EXECUTIVE SUM M ARY......................................................19

MANAGEMENT LETTER ................ ................. 22

1. Introduction ............................... 25

2. Audit Objectives........ ý ..................-.... 25

3. Audit Scope and Methodology ....................... 25

4. AUDIT FINDINGS AND RECOMMENDATIONS.. ...... 26

4.1 Organization and Management............................... 264.2 Financial Management.............................. 264.3 Procurement and Contract Management..............854.4 Assets M anagem ent............................................ 854.5 Monitoring and Evaluation........ ....................... 864.6 Compliance with grants/loan covenants.............. 864.7 Environment................ ................. 864.8 Sustainability................ ......... ....... 864.9 Overall Assessment........................................... 86

5. CONCLUSION.......- -..... . .................. .. 87

ACKNOWLEDGEMENT.,................ ..........-. 88

Abbreviations and Acronyms

AA Administrative Approval

CDWP Central Development Working Party

ECN EC Executive Connittee of NationalEconomic Counri

ERKF Economic Revitalization in Khyber Pakhtunkhwa &FATA

ES SAF Environmental & Social Screening and AssessmentFramework

FATA Federal ly Admni nistrated Tri bal Areas

GRMC Grant Review Management Committee

IFC International Finance Corporation

INTOSAI International Organization of Supreme Audit Institutions

IPSAS International Public Sector Acc<unting Standards

IRS Investment Road Show

KPBOIT Klyber Pakhtunkhwa Board of Investment and Trade

M&E Monitoring & Evaluation

MDTF Multi DonorTrust Fund

MOU Memorandum of Understanding

PDWP Provincial Development Working Party

PMU Project Management Unit

PC-I Planning Commission Proforma- I

SME Small & Medium Enterprises

SDA Sarhad Development Authority

SIDB Small Industrial Development Board

SMEDA Small & Medium Enterprises Dcvelopmcnt Authority

LOI Letter of Intent

PREFACE

The Auditor General conducts audit subject to Articles 169 and 170 of the

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

the Auditor-General's (Functions, Powers and Terms and Conditions of Service)

Ordinance, 2001.The Directorate General, Audit, Khyber Pakhtunkhwa conducted

Financial Attest Audit of the project "Economic Revitalization in Khyber

Pakhtunkhwa World Bank/MDTF Grant No.TF-99175 PAK" financed by World

Bank and Government of Khyber Pakhtunkhwa for the financial year 2015-16, in

December. 2016 with a view to reporting significant findings to stakeholders.

Audit examined the economy, efficiency, and effectiveness aspects of the project. In

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

with applicable laws, rules, and regulations in managing the project. The Audit Report

indicates specific actions that, if taken, will help the management realize the

objectives of the project.

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

and Financial Statements. Part-1I contains Executive Summary, Management Letter

and Audit Findings.

The Report has been prepared for submission to the donor in terms of its grant

agreement with the Government of Islamic Republic of Pakistan.

Dated: X6 /12/2016 (Javed lqbal)Peshawar Director General Audit.

Khyber Pakhtunkhwa

2

PART-I

1. PROJECT OVERVIEW

2. AUDITOR'S REPORT TO MANAGEMENT

3. FINANCIAL STATEMENTS

PROJECT OVERVIEW

Name of the Project : Fconoinic Revitalization in KhyberPakhtunkhwa

Sponsoring Authority World Bank

Executing Authority Government of Khyber Pakhtunkhwa

Industries Department

Grant No TF-99175 PAK

PC-I Cost Rs. 194,051 million

Actual Date of Coin mencement : 1 IOctober, 2011

Date of Completion December, 2016

Date of Approval by PDWP 31 "May, 2012

Grant closing date. December 2016

Grant Utilization Status in 2015-16

World Bank/MDTF Rs.413.293 million

Khyber Pakhtunkhwa Rs. 1.024 million

Progressive expenditure up to June 2016 Rs.964.347 million

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OFFICE OF THE DGA = 9211309DIRECTOR GENERAL AUDIT Dir: =9211306

KHYBER PAKHTUNKIIWA Fax: 9211265PESHAWAR PBX:= 9211250-54

AUDITOR'S REPORT

We have audited the accompanying financial statements of project "Economic

Revitalization in Khyber Pakhrunkhwa World Bank/MDTF Grant No.TF-99175

PAK" financed by Word Bank and Government of Khyber Pakhtunkhwa that

comprises of Statement of Receipts and Payments, Statement of Comparison of

Budget and Actual together with the notes forming part thereof for the year ended

June 2016.

Management Responsibility

It is the responsibility of project management to establish and maintain a

system of internal control, and prepare and present the Statements 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

the 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,

4

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 June, 2016 in

accordance with Cash Basis IPSAS, Financial Reporting under the Cash Basis

of Accounting Standard.

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

legal agreements-

Dated '16/12/2016 (Javed Iqbal)Peshawar Director General Audit,

Khyber Pakhtunkhwa

5

FINANCIAL STATEMENTS

ECONOMIC REVITALIZATION IN KHYBER PAKHTUTNK IWA WORLDBANKJMDTF GRANT NO.TF-99175

FOR TIlE YEAR ENDED ON 301h JUNE, 2016

Page NoStatement of Cash Receipts & Payments 7Statement of Comparison of Budget & Actual Arnount 8Notes to the Financial Statements 9Withdrawal Application Schedule 14Bank Statements 17

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