PIFRAk o W)polJouiroInyeR ncle Project to Improve Financial Reporting and Auditingflopo,Ffirg -jrlci AUdififq

House No 745, Ibn-e-Sena Road, G-11/2 Islamabad

No. 3 1 /PIFRA-1I/B&A/ExtAudit/2013-14 3Xst December, 2014

Syed Waseem KazmiFinancial Management SpecialistResident Mission, World BankG-5, Islamabad.

SUBJECr: AUDITED FINANCIAL STATEMENTS OF O MPROVEFINANCIAL REPORTING AND AUDITING PHASE-Il FOR THE FY 2013-14

Please find enclosed herewith the audited Financial Statements for FinancialYear 2013-14 in original, duly signed by the Project Director PIFRA and M/s Riaz Ahmad & Co., CharteredAccountant. These Financial Statements contain accounts of both IDA Credits i.e 4109-PAK and4864-PAK.

2. These audited Financial Statements also append the mandatory "Legal Certificate" andUschedule of disbursements" with regard to the IDA Credits 4109-PAK and 4864-PAK.

3. It would be appreciated to acknowledge the receipt of the audited Financial Statementsand conveyed the acceptance to this Office.

(Muhammad Adrian)Consultant B&A

Cc.1. PS to Project Director2. PA to DG Admn & Ops3. Office Copy

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

PIFRAR'nttoIn one: Project to Improve Financial Reporting and AuditingFepeAtno orwl Auditing

House No 745, Ibn-e-Sena Road, G-11/2 1slamabad.

No. 0 n PIFRA-IH/B&A/Ext Audit/2013-14 31st December, 2014

Syed Waseem KazmiFinancial Management SpecialistResident Mission, World BankG-5, Islamabad.

SUBJECT: SCHEDULE OF DISBURSEMENT - IDA CREDIT NO. 4864-PAK

Project to improve Financial reporting and Auditing(PIFRA-lI) has received

IDA Funds provided by the World Bank vide Withdrawal Applications during Financial Year

2013-14 in Assignment Account No 00162 maintained with National Bank of Pakistan,

Melody branch, Civic center Islamabad under IDA Credit No 4864-PAK as per following

schedule:-

WithdrawalSr# Application SBP Reference Date USD USD Rate Pak Rupee Disbursement

No Mode6KG-U-i10(ICA)/ Bn1 09 20460/827-2013 06.09.2013 848,818 104.8979 89,039,226 Bank

20460827-013rransferBKG-U-1 0(ICA)/ Bank2 12 BKG-1 08.01.2014 950,328 105.3865 100,151,742 Tan582/827-2014 Transfer

3 13 BKG-U-10(ICA)/ Bank3 13 582/827-2014 24.03.2014 1,616,916 98.0551 158546,860 Transfer

6KG-U-i10(ICA)/ Bn4 14 12480/827-2014 04.06.2014 87,088 98.4430 8,573,204 Bank__128082_2 1 1_____ __________ ______ Transfer

Total: 3,503,150 356,311,032

2. However, two direct payments worth EURO 145,679 and USD 109,373

equivalent to Pak Rupees 21,004,931 and Pak Rupees 11,472,998 have been paid to the

vendor by the World Bank, as third-party, against Withdrawal Applicati No. 10 &11

respectively during the FY 2013-14.

(Syed M ad Ayub)Project Director (PlFRA)

PIFRAF1AOC-no rr,cwnau Hinncio Project to improve Financial Reporting and Auditingreporig uIr4 A

4uibrg

House No 745, Ibn-e-Sena Road, G-11/2 Islamabad.

No. f /PIFRA-II/B&A/Ext. Audit/2013-14 31st December, 2014

Syed Waseem KazmiFinancial Management SpecialistResident Mission, World BankG-5, Islamabad

SUBJECT: SCHEDULE OF DISBURSEMENT - IDA CREDIT NO. 4109-PAK

Project to improve Financial reporting and Auditing (PIFRA-ll) has received

IDA Funds provided by the World Bank vide Withdrawal Applications during Financial Year

2013-14 in Assignment Account No 00132 maintained with National Bank of Pakistan,

Melody branch, Civic Center Islamabad under IDA Credit No 4109-PAK as per the following

schedule:-

Sr. Withdrawal DisbursementNo. Application SBP Reference Date USD USD Rate Pak Rupee Made

1 28 BKGU-10(1CA)/ 06.09.2013 1,350,100 104.8979 141,622,655 Bank Transfer__________ 20461/827-2013 1_____ _ _ __ _ _____

Total: 1,350,100 141,622,655

2. However, a direct payment worth USD 1,317,500/= equivalent to

Pak Rupees 138,202,983/= has been paid to the vendor by the World Bank, as third-

party, against Withdrawal Application No. 29 during the FY 2013-14.

(Syed M a ad Ayub)Project Director (PIFRA)

PIFRAProentompn ixUK1i Project to Improve Financial Reporting and AuditingROTotting ond Auciling

House No 745, Ibn-e-Sena Road, G-11/2 Islamabad.

No. If &2. /PIFRA-II/B&A/Ext-.Audit/2013-14 31st December, 2014

TO WHOM IT MAY CONCERN.

It is certified that the funds utilized during the financial year 2013-14 and

reported in the audited financial statements for IDA credits 4109-PAK a d 4864-PAK

have been used for the intended purposes as per legal agreements.

(Syed ad Ayub)Project Director (PIFRA)

Syed Waseem KazrmiFinancial Management SpecialistResident Mission, World BankG-5, Islamabad.

-C-'h.artered Accountants.,

R EM7 $RVEFINANCIAL I9il

AUD TPP

17 4ý

PROJECT IMPLEMENTED BY~

PA>C0AN AU DIT DEPARtM~NTY-

AUDT FORTHE YEAR ENDED

30 JUNE 21

1N AL01-

* N- t4El,

R AZ AHMAD-&,coPANCh arte red Acco untants

Af j1RIZAHMAD&COMPANY

ITRÖMLCION AND PRJECT BACKGROUN D 21 s2

Ii3 S O AUDIT 31

4 ALJITOR'S REPORT 41 4,2

5 -TATEMEt$ OF CASH RECEIPTS AND PAMENTS 5 -5

IiIM

KAZAHMAD&COMANYChartered Accountants

COVERINGj LETE*

(SECTION 1)

r1* --

,

3K~

IRIAZ AHMAD & COMPANY IE-

Chartered Accountants I INTLRNATIONAL

ISyed Muhammad Ayub 22 December 2014

Project Director Our ref: P-142

Project to Improve Financial Reporting andAuditing (PIFRA)House No. 745Ibn-e-Sina Road, G-1 1/2ISLAMABAD

Dear Mr. Ayub

AUDIT FOR THE YEAR ENDED 30 JUNE 2014

We are pleased to enclose five copies of the draft financial statements of PROJECT TOIMPROVE FINANCIAL REPORTING AND AUDITING (PIFRA) for the year ended 30June 2014 together with our draft report duly initialed by us for identification purposeonly. We shall be glad to sign our report in the present or amended form after we havereceived:

* the enclosed financial statements duly approved and signed by you; and

. Management representation letter duly signed by you and head of finance.

2. RESPONSIBLITIES OF THE MANAGEMENT AND AUDITOR'S IN RELATION TOTHE FINANCIAL STATEMENTS

The responsibilities of the independent auditor, in a usual examination of financialstatements, are explained in International Standard on Auditing - 200. While theauditor is responsible for forming and expressing an opinion on the financialstatements, the responsibility for the preparation of financial statements is primarily thatof the Project's management. The management's responsibilities include themaintenance of adequate accounting records and internal controls, the selection andapplication of accounting policies, safeguarding of assets of the Project and preventionand detection of frauds and irregularities. The audit of the financial statements does notrelieve the management of its responsibilities. Accordingly, our examination of thebooks of account and records should not be relied upon to disclose all the errors orirregularities in relation to the financial statements.

We would like to inform the management that unless we have signed the auditor's

report on these financial statements, the same shall remain and be deemed unaudited.

I2-A, ATS Centre, 30-WestFazal-ul-Haq Road, Blue AreaIslamabad, PakistanTelephones (92-51) 22741 21-2Fax (92-51)2278859

P" Ahmad & Cump"q it a moMeF of Nmia iwrmwitonal racoisd@racopk.comI Worldwide rte[wrk af PnKWpendmi amwling and tonsu 4in www.racopk.com

I

IRIAZ AHMAD & COMPANY

Chartered Accountants

3. CONTINGENCIES AND COMMITMENTS

We have been informed by the management that there were no contingencies andcommitments as on the date of the financial statements, other than those disclosed inthe financial statements.

4. GENERAL

I Finally, we wish to express our appreciation for the co-operation and courtesy extendedto us by the management and other staff members in accomplishing our task.

Ii Very truly yours

IIIIIIIIII1

II

I-

1-RIAZ AHMAD & CONPANYChartered Accountants

- .TR UU AND PROJECT ØCKUN~ D

(SECTION 2)

I -- •,

--

I

II

INTRODUCTION AND PROJECT BACKGROUNDPIFRA - (CREDIT NO. 4109-PAK & 4864-PAK)

STATUS AND BACKGROUND

2.1 Project to improve financial reporting and auditing ("the Project") is launched byPakistan Audit Department in association with World Bank. The objective of theProject is to increase usage of information technology along with core accountingsystem and auditing to generate timely and relevant information to the Federal,Provincial and District Governments. Besides, it would also help in strengtheningthe existing accountability process, which is one of the basic requirements of goodgovernance. PIFRA aims at developing capacity for good governance in fiscalmanagement sphere to achieve the vision of strengthened Integrated FinancialManagement System (IFMS) of the country.

Sound fiscal management framework grounded in best practices carried out byskilled resources is critical to the success of poverty alleviation efforts of theGovernment. This helps in efficient resource allocation, execution and monitoring,which in turn expands the fiscal space for financial managers to do long-termplanning and reduce debt for resource support.

Therefore, good governance and capacity building in fiscal management of thecountry is identified as the primary focus of PIFRA Project.

(a) PIFRA-I

It is a multi-dimensional challenge to build capacity in terms of (i) best practices;(ii) tools and technology supportive of best practices; and (iii) people. GOPwants to achieve this vision through a long-term strategy of capital investmentthrough successive projects in this sphere. In PIFRA-I, the foundations were laiddown. Structural imperatives of best practices in the form of auditing as anindependent function from accounting achieved in PIFRA-l through two separateordinances, Auditor Generals Ordinance, 2001 and Controller GeneralsOrdinance, 2001. This has removed an important structural imbalance in fiscal

management edifice of the country.

(b) PlFRA-II

Since PIFRA II is a follow up project of PIFRA-1, the logical next step in PIFRA 1lis to expand the scope of these efforts for more comprehensive coverage to therelevant entities spanning across various tiers of the country at national,

provincial, district and sub-district levels to fully leverage the capabilities of thenew systems.

2.1

1

I

INTRODUCTION AND PROJECT BACKGROUNDPIFRA - (CREDIT NO. 4109-PAK & 4864-PAK)

I Besides greater coverage, developing the skills and knowledge of personnelconducive to a 'culture' reflective of technology-supported best practices willensure the success of the vision.

2.2 The Project has the following main objectives;

1 > Establish effective accounting and reporting systems.> To modernize Government audit procedures and adopt internationally

accepted auditing standards.> Strengthen financial management practices.> Generate financial information, which is more useful, complete, reliable and

timely.

> Tighten internal controls and minimize the occurrence of errors andirregularities in the processing of payments and receipts.

> To emphasize transition and ownership of the IT systems to stakeholders.

PROJECT COST ESTIMATES

1 2.3 Summary of Project cost estimates is given below:

________ .1_________ -0 i it i

u Original cost 535.560 4,998.261 5,533.821 9.001 84.004 93.005

Revised cost 1,115.367 8,466.829 9,582.196 15.193 108.504 123.697

New revised1,405.367 8,930.000 10,335.367 18.138 108.504 126.642cost103530 12.4

Original PC-I

Exchange rate: 1 US$= 59.50 PKR

Revised PC-I

Exchange rate: 1 US$= 59.63 PKR up to June 2006Exchange rate: 1 US$= 60.14 PKR up to June 2007Exchange rate: 1 US$=61.12PKRuptoJune2008Exchange rate: 1 US$= 77.48 PKR up to June 2009Exchange rate: 1 US$= 81.77 PKR up to June 2010Exchange rate: 1 US$= 85.50 PKR from July 2010 to March 2013Exchange rate: 1 US$= 98.50 PKR from 31 March 2013 to December 2014

2.2

I

I

III INTRODUCTION AND PROJECT BACKGROUND

PIFRA - (CREDIT NO. 4109-PAK & 4864-PAK)

1 2.4 PIFRA II comprises of four components to which the whole project finance hasbeen allocated:

- Rupees in million --1. Financial Accounting and 61.558 4,960.000 5,021.558

Budgeting System - FABS2. Capacity Building and 1.502 2,040.000 2,041.502I_ Up gradation of OAGP3. Capacity Building and 4.670 1,530.00 1,534.670

Up gradation of CGA4. Project Management 1,337.637 400.000 1,737.637

Total Project Cost 1,405.367 8,930.000 10,335.367

PROJECT FUNDING

2.5 For financing the Project, development credit agreement for US D 84 million(equivalent to Special Drawing Rights 56.6 million) was signed in September2005. International Development Association (IDA) also agreed to finance theadditional USD 24.50 million (equivalent to Special Drawing Rights 15.6 million)required for the sustainability of the Project for the next two years vide additionalfinancing agreement dated 02 June 2011 (CREDIT NO. 4864-PAK). The operationand maintenance cost of the Project except as agreed by the IDA, shall befinanced by the Government of Pakistan (GoP) resources equivalent to USD18.138 million for covering the operational and maintenance cost.

Original Finance 84.004 11.567Additional Finance 24.500 3.626GoP for extended period - 2.945Total Funding 108.5 04 1 18.138

1 PROJECT IMPLEMENTATION PERIOD

2.6 The Project commenced on 01 June 2005, whereas the contract was formallysigned by the representatives of both authorities on 23 September 2005 with targetdate of 31 December 2010 for project completion. However, in order to keep theprocess of reforms sustainable, the implementation of the Project was extendedand expected to be completed by 31 December 2014.

1 2.3

I

I

I INTRODUCTION AND PROJECT BACKGROUNDPIFRA - (CREDIT NO. 4109-PAK & 4864-PAK)

2.7 The World Bank vide its letter dated 07 June 2013 has agreed for extension of theProject till 31 December 2014. In this regard Principal Accounting Officer andExecutive Committee for National Economic Council (ECNEC) have approved thesecond revision to PC-1 in its meeting held on 04 December 2014 as conveyed byMinistry of Planning, Development and Reforms vide O.M.No.9(32)PIA-IV/PC/2013 dated 16 December 2014.

I V

IIIII1I

II

111

1 2.4

II

- -- :t-

IAZ AHMAD & COMPANYIChartered Accountants

SCOPE OFM DIT'

(SECTION 3>

-~ IN T BE L

-I*

I

SCOPE OF AUDIT

KIMETHODOLOGY

1 3.1 Audit approach and methodology for undertaking the audit as per terms ofreference are summarized below:

I * The audit is carried out in accordance with the international Standards on

Auditing (ISA) and includes such test and control, as considered necessary

under the circumstances. in conducting the audit, special attention was paid to

the following:

a) External funds used in accordance with the conditions of the

Development Credit Agreements (Credit No. 4109-PAK dated 23

September 2005 and Credit No. 4864-PAK dated 02 June 2011) with due

attention to economy and efficiency and for the purposes for which they

were provided.

b) Counterpart funds provision and their usage in accordance with the

relevant financing agreements, with due attention to economy and

efficiency, and for the purposes for which they were provided;

c) Goods and services procured in accordance with the relevant financing

agreement;

d) All necessary supporting documents, records and accounts of all project

ventures.

e) Special Accounts maintenance in accordance with the relevant financing

agreement.

f) Project accounts prepared in accordance with International Public Sector

Accounting Standards (IPSAS) - Financial Reporting Under Cash Basis of

Accounting exhibiting true and fair view of the financial situation as at 30

June 2014 and of resources and expenditure for the year ended on that

date.

3.1

III

RIAZXHMAD&-COMPA-YChfartered Accounts

1 AUDIOS -REPOff,4

* (SEGTION 4)

1N-kÅT-WL

1-

II RIAZ AHMAD & COMPANY I

Chartered Accountants I INTERNATIONAL

I INDEPENDENT AUDITOR'S REPORT TO THE PROJECT DIRECTOR

I We have audited the accompanying financial statements of PROJECT TO IMPROVEFINANCIAL REPORTING AND AUDITING (PIFRA), which comprise the statement ofcash receipts and payments and component wise statement of cash receipts andpayments for the year ended 30 June 2014, and a summary of significant accountingpolicies and other explanatory information. The financial statements have beenprepared by management using the cash receipts and payments basis of accountingdescribed in Note 1.1 to the financial statements.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financialstatements in accordance with the cash receipts and payments basis of accountingdescribed in Note 1.1; this includes determining that the cash receipts and paymentsbasis of accounting is an acceptable basis for the preparation of the financial statementsin the circumstances, and for such internal control as management determines isnecessary to enable the preparation of the financial statements that are free frommaterial misstatement, whether due to fraud or error.IAuditor's Responsibility

Our responsibility is to express an opinion on these financial statements based on ouraudit. We conducted our audit in accordance with International Standards on Auditing.Those standards require that we comply with ethical requirements and plan andperform the audit to obtain reasonable assurance about whether the financialstatements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amountsand disclosures in the financial statements. The procedures selected depend on theauditor's judgment, including the assessment of the risks of material misstatement of thefinancial statements, whether due to fraud or error, In making those risk assessments,the auditor considers internal control relevant to the entity's preparation of the financialstatements in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on the effectiveness ofthe entity's internal control. An audit also includes evaluating the appropriateness ofaccounting policies used and the reasonableness of accounting estimates, if any, madeby management, as well as evaluating the overall presentation of the financialstatements.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion.

I2-A, ATS Centre, 30-WestFazaIt-Haq Road, Blue AreaIslamabad, PakistanTelephones (92-51) 22741 21-2Fax (92-51)2278859

Rka Ahmad & Company r; a mn rtW ot Neva inhematiowj, racoisd@racapk.coma wcnIdwde neiwrA of independent accounting and onskingfirms. www.racopk.com

I

IRIAZ AHMAD & COMPANYI Chartered Accountants

Opinion

In our opinion, the financial statements present fairly, in all material respects, cashreceipts and payments of PROJECT TO IMPROVE FINANCIAL REPORTING ANDAUDITING (PIFRA) for the year ended 30 June 2014 in accordance with basis ofaccounting described in Note 1.1 to the financial statements.

RIAZ AHMAD & COMPANYChartered Accountants

UName of engagement partner: Atif Bin Arshad

Date: 31 DEC 2014I IslamabadI

III

IIIIIIII

RIAZAH -MAD,& COMPPA-'NY.

STATM~ O5F CASH RECEl PTS »ID-PAYMEN -T.S

1 (SECTION 5)

14

I

PROJECT TO IMPROVE FINANCIAL REPORTING AND AUDITING (PIFRA)STATEMENT OF CASH RECEIPTS AND PAYMENTS

FOR THE YEAR ENDED 30 JUNE 2014

30 june 2014 30 June 2013

Receipts / Receipts /(Payments) Payment by (Payments) Payment by

controlled by third party controlled by third partyPIFRA PIFRAjT NOTE (Rupees in thousand) (Rupees in thousand)

RECEIPTS:

International Development Association (IDA) 497,934 170,681 84911 339,522Government of Pakistan (GoP) 132991 - 125,298

630,925 170,681 974,809 339,522PAYMENTS:

Operating activities:

Operational and maintenance - GoP 2 (132,991) - (125,298) -Technical assistance / consulting services (194,193) (32,478) (274,567) -Training and development (13,278) (32,929) -

(340,462) (32,478) (432,794) -Investing activities:

Civil works 3 (28,909) - (160,167) -Equipment 4 & 4.2 (120,397) (138,203) (446,075) (339,522)

(149,306) (138,203) (606,242) (339,522)Total project payments (489,768) (170,681) (1,039,036) (339,522)Net increase /(decrease) in cash for the year 141,157 - (64,227) -

Cash and cash equivalent at beginning of the year 149,257 - 213,484

Cash and cash equivalent at end of the year 5.2 290,414 - 149,257 -

Unrealized exchange loss at the beginning of the year (289,491) - (259,370) -

Unrealized exchange loss for the year (32,080) - (30,121)

Unrealized exchange loss at the end of the year 6 (321,571) - (289,491) -

Contingencies and commitments 7

The annexed notes form an integral part of these financial statements.

1PROJ bE COSYED MUHAMMAD AYU13

roject Director, pIFRAI Ole0the Auditor General of PakistanIII

I

I

II

PROjECT TO IMPROVE FINANCIAL REPORTING AND AUDITING (PIFRA)

COMPONENT WISE STATEMENT OF CASH RECEIPTS AND PAYMENTS

ACTUAL VS BUDGET

FOR THE YEAR ENDED 30 UNE 2014

IIDA Credit No* Payment by Payment 30 June 2014 30 June 2013

Project Component/Caiogory G OP third party by thNrd Actual Budgeted as AculIBudgeted as4109 4864 4109 pay Total prP per PSDPI--- --------------------------- Rupees in thousand ---- -------------

RECEUPTS:

InterrationalDevelopmentAgerxy(IDA) 141,623 356,311 - 138,203 32,478 668,615 - 1,189,033Imoernmentof Pakisan (GOP) - 132.991 . - 132,991 125,298

1-141,623 356,311 132,991 138,203 32,478 801,606 - 1,314,331

Operating activities-

Financial Accounting and Budgeting System JFABS)

Technical assistance/Consulting services - 66,U8S - 32,478 99,366 102718 127,297 127,297Training arxl Development 718 7,186 -,94.4 70 18171 25,068 2i,068

CaactyBulin ad pgain (AG)718 74,074 -- 32,47ti 107,270 120,889 152,365 152,365CaaiyBuilIdi ng adUgain O P

Technical assistarce/Consulting services 105 41,938 - - 42,043 43,461 50,445 50,445Training and Development 1,973 1,749 - - - 3,722 6,557 5,024 5,024

2,07H 43,687 - 45,765 52,018 55,469 55,469Capacity Builing and Ulpgrai ng (CGA)

Technical assisiance/ Consuhing services 2,645 62,194 - - - 64.839 67,026 72,464 72,464Training and Development 1,537 - - - - 1,537 3,534 2,431 2,431

4,182 62,194 - 66,376 70,560 74,895 74,895Project Managereni- (PM)

Technrcal assistance/Consullng services 162 20,261 - - 20,423 21,112 24,361 24,361Training and Developmnart 115 - - 115 264 406 406OperaliFon anxi mainlensame =)P) - 13Z991 132,991 136,498 125,296 125,298

277 20,261 132,991 - 153,529 157,874 150,065 150,0657,255 200,216 132,991 32,478 372,940 401,341 432,794 432,794

I SrThe anrnxed rles form an integral part of these financial statements.

II PROIE OR

SYED MUHAMMAD AYUBProjeI Directer PIFRA

Olio the Auditor General of PakisLanIslamabad

III

I

I

II

PROJECT TO IMPROVE FINANCIAL REPORTING AND AUDITING (PIFRA)COMPONENT WISE STATEMENT OF CASH RECEIPTS AND PAYMENTS

ACTUAL VS BUDGET

FOR THE YEAR ENDED 30 JUNE 2014

IDA Credit No. payment b Payment 30 June 2014 30 June 2013

Project Component/Category GDP third party id Actual Budgoed as c Budgetd as4109 40&4 4109 "ry Total per PSOP Acua per PSDP

10 48664

----------- ----------------- Rupes in thousand ------------------------

FinancialI Accounting and Budeting Systrm (FAG5)

civil works 114 239 - -353 630 19,77E, 19,776Equpmnt 24,399 74,992 - 138,203 - 237,594 285,930 760,601

apacityuWldingandUpgrading(OAGP) 24,513 75,231 - 138,203 - 237,947 286,560 70,377

v1k awodks 26,443 - § 26,443 47,165 90,995 900995IEquipment - 20,526 -- 20,526 24,702 24,274 24,274

Capacity Building and Upgrading (CGA) 26,443 20,526 46,969 71,867 115,269 115,269

CI works 2,113 - 2,113 3,768 49396 49,396I Equipment - - - 575 5752,113 - - 2,113 3,768 49,971 49,971

Project Man-a8ement (PM)

Equpmnwt 242 230 - 480 578 147 147

242 238 - - - 480 578 147 14753,311 95,995 - 138,203 287,509 362,773 945,764 945,764

Total project payments 60,566 296,211 132,991 138,203 32,478 660.449 764,114 1,378,55 1,378,558Net increase/ (deaeaxe) in cash for the year 81,057 60,100 - - 141,157 (764,114) (64,227) (1,376,558)

Cash and cash equivalent at beginning of The year 11,199 138,058 - - 149,257 - 213,484

Cash and cash equivalent at the and of year 92,256 198,158 - 290,414 (764,114) 149,257 -

Unrealhed ochange loss at the beginning of the year (262,069) (27,422) - - - (289,491) (259,370)Unrealized

echange loss for the year

(16,695) 15,185)

--

(32.0801

(30,121)

Unrealioed exchange loss at the end of the year (278,964) (42,607) - - (321,571) (289,491) -

I VThe annexed notes form an integral part of these financial statements,

II

PROJE I CTOk

SYED MUH4AMMAD AYUa

fSIllabadI1IIII

II

PROJECT TO IMPROVE FINANCIAL REPORTING AND AUDITING (PIFRA)NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 jUNE 2014

1 ACCOUNTING POLICIES

11 Basis of preparationThese financial statements have been prepared in accordance with International Public Sector Accounting Standards (IPSAS) - Financial Reportingunder the Cash Basis of Accounting, where receipts are recognized when received rather than accrued, and expenses are recognized when paidrather than when incurred.

The accounting policies have been applied consistently throughout the year.1.2 Reporting entity

These financial statements are for the Project to Improve Financial Reporling and Auditing (the Project'). The Project was launched by Pakistan AuditDepartment in association with World Bank. The objective of the Project is to increase usage of information technology along with core accountingsystems to generate timely and relevant information to the Federal, Provincial and District Governments. The Project was commenced on 01 June2005 whereas the contract was formally signed (CREDIT NO. 4109-PAK) by Government of Pakistan (GoP) and World Bank on 23 Septenber 2005with target date of 31 December 2010 for project completion. However, in order to keep the process of reforms sustainable InternationalDevelopment Association (JDA) and GoP entered into an agreement dated 02 June 2011 (CREDIT NO. 4864-PA K) for addiional financing equal toUSD 24.5 million by IDA and USD 3.626 million by GoP with Project completion date extended to 30 June 2013. Further, extention was granted byWorld Bank and GoP upto 31 December 2014.

1.3 Repoling currency

These financial statements have been reported in Pak Rupees.

1.4 Foreign currency transactionsRevolving Fund Account (RFA) - Foreign Currency Assignment Account in National Bank of Pakistan is used for financing under IDA crediL Theforeign currency amounts recorded under a foreign credit for RFA is translated into Pak Rupees by the State Bank of Pakistan (SBP) at weightedaverage buying rate of exchange prevailing on the date of Itran sfer of funds by the World Bank The payments out of RFA are translated notiona Ily intoforeign currency by National Bank of Pakistan at the aforesaid 58P rate of exchange prevailing on the date of payment for the purpose ofreimbursement.

Unrealized gains and losses arising from changes in foreign currency exchange rates are not the Project's cash receipts and payments. However, theeffect of exchange rate changes on notional cash held in foreign currency is reponed separately it the statement of cash receipts and payments.

15 Taxation

No profit or loss is involved in the Project activities hence no tax provision is required. However, withholding tax on salaries and supplier payments isbeing deducted and deposited into Government treasury as per the provisions of the Income Tax Ordinance, 2001.

1.6 Employees terminal benefits

I Service benefits of Government deputation ist employees are accounted for in their respective depaiments while no service terminal benefit is paid tothe contractuatI employees.

1.7 Cash and cash equivalent

Cast and cash equivalent comprise balances with banks.

1.8 Payment by third parties

PIFRA also benefits from goods and services purchased on its behalf as a result of cash payments made by third parties during the period by way ofloan and contributions. The payments made by third party do not constitute cash receipts or payments by PIFRA but do benefit PIFRA. They aredisclosed in the Payment by third party column on the face of Statement of Cash Receipts and Payments and Component Wise Statement of CashR4ceipts and Payments.

30 june 2014 30 June 2013(Rupees in thousand)

2 OPERATIONAL AND MAINTENANCE - GoP

Salaries, allowances and other benefits 101,940 97,678Travelling and transportation 3,609 1,896Vehicle operaling expenses 7,804 4,518Computer related expenses 3,436 3,210Utilities 1,846 2,635Stationery 1,666 1,1"4Occupancy costs 8,892 10,671Printing 123 33Repair and maintenance 979 860Others 2,696 2,633

132,991 125,298

I1I

II

3 CIVIL WORKS

It represents the construction, up gradation, renovation, extension cost of Audit & Account Complexes, CGA/AGPR/AG Offices, Finance Divisions,Treasury Offices, District Account Offices and Regional Directorate Offices as per the annual framed procurement plan,

4 EQUIPMENT

Description FABS OAGP CGA PM 30june 2014 30 june 2013

-(Rupees In thousand)----IDA Credit No. 4109 NOTE

Computers

Network and allied systems / electrification - - - 39,565

Office accessories and miscellaneous - 242 242 -

Diesel generator

Fumiture and fixture

Electric equipment

Users licenses and allied systems / software 41 24,399 - 24,399 118,846

24,399 - - 242 24,641 158,411IDA Credit No. 4864

Computers 62,921 9,178 - 144 72,243 208,338

Network and allied systems/electrification 208 - - 4 212 1,630

Office accessories and miscellaneous 408 - 6 414 775

Diesel generator 1,952 1,952 6,551Furniture and fixture 105 - - 34 139 149

Electric equipment 9,398 2,007 - 49 11,454 4,109

Users licenses and allied systems / software - 9,342 - - 9,342 66,112

74,992 20,527 - 237 95,756 287,66499,391 20,527 - 479 120,397 446,075

4.A This includes payment of Rupees 24.399 millian (2013: Rupees 59 million) made to Commissioner Inland Revenue under the Income Tax Ordinance,I 2001 against Annual Enterprise Support fee, SAP ECC 6.0-

4.2 Description FABS OAGP CGA PM 30 june 2014 30 june 2013-(Rupees in thousand)-------

Payment by third partyIDA Credit No. 4109 NOTE

Users licenses and allied systems / software 4.3 138,203 - - 138,203 339,522IDA Credit No. 4864

Users licenses and allied systems /software 4.4 32,478 - - - 32,478 -170.681 - - - 170.681 33_%52

43 This represents amount paid by World Bank on behalf of PIFRA for Annual Enterprise Support fee, SAP ECC 6.0.

4A This represents amount paid by World Bank on behalf of PIFRA for site maintanance fee and SAP R/3 fee.

4.5 Most of assets including equipment are purchased and delivered by PIFRA to other Govemment offices under the jurisdiction of Cantroller General ofAccounts, Finance Division / Departments and Auditor General of Pakistan. As these assets are under the direct control and use of these Governmentoffices, PIFRA Directorate is not maintaining the record of these fixed assets in the form of fixed asset register.

30 june 2014 30 June 2013NOTE (Rupees in thousand)

5 RECONCILIATION WITH BANK BALANCESBalance as per bank statements 5.1 300,049 316,048Balance as per cash books 5.2 290,414 149,257Difference 9,635 166,791

Represented by.

Un-presented / Uncredited instruments - net 10,214 169,172Advances given to Ministry of Finance / Finance Departments (579) (2,381)

9,635 ... 166,91

II

II

30 june 2014 30 june 2013NOTE (Rupees in thousand)

5.1 Bank balance as per bank statements

Head Office balance (RFAk

IDA Credit No.4109 90,119 116,282IDA Credit No, 4864 204,757 194,749

Regional Directorates' balances 5,173 5,017300,049 316,048

52 balance as per cash bookHead Office balance (RFA)

IDA Credit No.4109 5.3.1 90,694 11,199IDA Credit No. 4864 5.3.2 193,697 134,841

Head Office balance - Demand Drafts 5.3.3 1,561 -

Regional Directarates' balances 4,462 3,217290,414 149,257

5.3 Head Office cash book

5.3.1 IDA Credit No. 4109

Cash book balance as on 30 June 90,115 8,818Advances given to Ministry of FInance /Finance Department 579 2,381

5.3.2 IDA Credit No. 48641119

Cash book balance as on 30 rune 193,697 134,841

5.3.3 This represents refund of long outstanding advances issued to Finance Department Sindh and Punjab.

30 june 2014 30 june 2013(Rupees in thousand)

6 UNREALIZED EXCHANGE LOSS - NOT ATTRIBUTABLE TO THE PROjECTHead Office - RFA balances as per bank statements (US Dollars in thousand) 5,866 6,069

Head Office converted balance as on June 30 (Pak Rupees in thousand)(2014:1 04.90 & 105.39 & 2013: 99.02 &9883) 616,448 600,522Head Office - KFA balances as per bank statements (Pak Rupees in thousand) 294,877 311,031Unrealized exchange loss as on June 30 (Pak Rupees in thousand) (321,571) (289,491)

Unrealized exchange loss for the year (Pak Rupees in thousand) (32,080) (30,121)

6.1 This represents notional loss on bank dollar amount shown in bank statement. The resultant loss does riot accrue to the Project. Unrealized exchangeloss will be settled at the completion of the Project. The dollar balances, if any, will be refunded to World Bank at the end of the Project by GoP inaccordance with revised accounting procedure for Revolving Fund Account (Foreign Currency Assignment Account) issued by Govemment ofPakistan Finance Division (Budget Wing) via O.M No. No.F.2(1)-BR-Il/2007-949 dated 02 August 2013.

7 CONTINGENCIES AND COMMITMENTS

Contingencies

Ws Perk Engineers and Contractors (the contractor) filed an application before the learned Civil Court, Islamabad, under section 20 of the ArbitrationAct, 1940 for Ihe appointmen1 of arbitrator to settle the disputes between the Project and the contractor after the decision of adjudicator, who gave thedecision in favour of the Project. The learned Civil Court directed both parties to submit name of arbitrators before Civil CourtThe case was transferredto Islamabad High Court, Islamabad who directed to carry out measurement of work done at site and granted stay against encashment of guaranteesamounting to Rupees 22.1 million. Both the parties submitted different names (or appointment of arbitrator. However, during proceedings agreed tothe name of Mr. Justice Nasim Sikandar to be appointed as Sole Arbitrator. The claimant filed a claim amounting to Rupees 126,490,692 before thearbitrator on which the respodeni counter claimed amounting to Rupees 224,890,000.

The hearing is pending before the Sole Arbitrator and the management of the Project is hopeful for the favourable outcome of the case.

30 June 2014 30 June 2013(Rupees in thousand)

7.1 Commitments

Comrnitments as per Procurement Plan / PSOP

Capital:Equipment 665,157 1,177,439Civil works 126,876 40,000

Others 421,166 715,5611,213 201 1,933,000

I

I

II

8 DATE OF AUTHORIZATION FOR ISSUEj These financial statements were authorzed for issue on 3 1 DEC 2014 by Project Director of the Project

9 GENERAL

9.1 Figures have been rounded off to the nearest thousand of rupee.

92 No significant reclassification of corresponding year's figures have been made. /

II

SYED MUHAMMAD AYUBPrOet Directir, PIPRA

ot the Auditor General Of PakistanIfilarnabadI

IIII

III

IIIIIIi