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Qinghai Provincial Audit Office of the People's Republic of China

Audit Report,V9.# C2019 21#

QINGHAI AUDIT REPORT C 2019) NO. 21

Project Name: Qinghai Xining Water Environment Management

Project Financed by the World Bank

4 &9: 8423- CNLoanNumber: 8423-CN

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Project Entity: Project Construction Office of Qinghai Xining

Water Environment Management Project

4-it4A: 2018

Accounting Year: 2018

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I. A uditor's O pinion.....................................................................................5

II. Financial Statements and Notes to the Financial Statements................7

i. B alance Sheet..................................................................................... 7

( )............................................................................... 9

ii. Summary of Sources and Uses of Funds by Project Component.....9

( ) t )z A.f11.ka........................................................ I11

iii. Statement of Implementation of Loan Agreement..........................11

(K )k ; ..........................................................................12

iv. Designated Account Statement.......................................................12

(-TL )............................................................................ 14

v. Notes to the Financial Statements................................................... 17

III. Audit Findings and Recommendations............................................... 23

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一、审计师意见

审计师意见

青海襼宁环境综合治理利用世行贷款项目建设办公室：我们审计了世界银行贷款青海襼宁环境综合治理项目 2018 年 12

月 31 日的资金平衡表及截至该日同年度的项目进度表、贷款协定执行情况表和指定账户报表等特定目的财务报表及财务报表附注（第 7页至第 19 页）。

（一）项目执行单位及青海省财政厅对财务报表的责任

簖制上述财务报表中的资金平衡表、项目进度表及贷款协定执行情况表是你办的责任，簖制指定账户报表是青海省财政厅的责任，这种责任包括：

1．按照中国的会计准则、会计制度和本项目贷款协定的要求编制项目财务报表，并使其实现公允反映；

2．设计、执行和维护必要的内部控制，以使项目财务报表不存在由于舞弊或错误而导致的重大错报。

（二）审计责任

我们的责任是在执行审计工作的基础上对财务报表发表审计意见。我们按照中国国家审计准则和国际审计准则的规定执行了审计工作，上述准则要求我们遵守审计职业要求，计划和执行审计工作以对

,.－ 项目财务报表是否不存在重大错报获取合理保证。为获取有关财务报表金额和披露信息的有关证据，我们实施了必

要的审计程序。我们运用职业判断选择审计程序，这些程序包括对由于舞弊或错误导致的财务报表重大错报风险的评估。在进行风险评估时，为了设计恰当的审计程序，我们考虑了与财务报表相关的内部控制，但目的并非对内部控制的有效性发表意见。审计工作还包括评价所选用会计政策的恰当性和作出会计估计的合理性，以及评价财务报表的总体列报。

我们相信，我们获取的审计证据是适当的、充分的，为发表审计

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意见提供了基础。

（三）审计意见

我们认为，第一段所列财务报表在所有重大方面按照中国的会计准则、会计制度和本项目贷款协定的要求编制，公允反映了世界银行贷款青海襼宁环境综合治理项目2018 年 12 月 31 日的财务状况及截至该日同年度的财务收支、项目执行和指定账户收支情况。 ＿.:

（四）其他事项

我们审查了本期内由青海省财政厅报送给世界银行的第 26 号至第 35 号提款申请书及所附资料‘我们认为，这些资料均符合贷款协议的要求，可以作为申请提款的依据。

本审计师意见之后，共同构成审计报告的还有两项内容：财务报表及财务报表附注和审计发现的问题及建议。

中华孙 · ⋯

地址：中国青海省襼宁市五四大街牡号邮政簖码：810001电话：86一0971一6182531传真：86一0971一6182500

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1. Auditor's OpinionAuditor's Opinion

To Project Construction Office of Qinghai Xining Water Envirom-nentManagement Project

We have audited the special purpose financial statements (from page 7 topage 19) of Qinghai Xining Water Environment Management Projectfinanced by the World Bank, which comprise the Balance Sheet as ofDecember 31, 2018, the Summary of Sources and Uses of Funds byProject Component, the Statement of Implementation of LoanAgreement and the Special Account Statement for the year then ended,and Notes to the Financial Statements.

Responsibilities of the Project Entity and Qinghai ProvincialFinance Bureau for the Financial Statements

The preparation of the Balance Sheet, the Summary of Sources and Usesof Funds by Project Component and the Statement of Implementation ofLoan Agreement is the responsibility of your entity, while thepreparation of the Designated Account Statement is the responsibility ofQinghai Provincial Finance Bureau, which includes:i.Preparing and fairly presenting the accompanying financial statementsin accordance with Chinese accounting standards and system, and therequirements of the project loan agreement;ii.Designing, implementing and maintaining necessary internal control toensure that the financial statements are free from material misstatement,whether due to fraud or error.

10 Auditor's Responsibility

Our responsibility is to express an opinion on these financial statementsbased on our audit. We conducted our audit in accordance with theGovernment Auditing Standards of the People's Republic of China andInternational Standards on Auditing. Those standards require that wecomply with ethical requirements and plan and perform the audit toobtain reasonable assurance about whether the financial statements arefree from material misstatement.

An audit involves performing procedures to obtain audit evidence aboutthe amounts and disclosures in the financial statements. The proceduresare selected depending on the auditor's judgment, including theassessment of the risks of material misstatement of the financial

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statements, whether due to fraud or error. In making those riskassessments, the auditor considers internal control relevant to theentities' preparation and fair presentation of the financial statements inorder to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on theeffectiveness of the entity's internal control. An audit also includesevaluating the appropriateness of accounting policies used and thereasonableness of accounting estimates made by management, as well asevaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is appropriate andsufficient to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements identified in the first paragraphpresent fairly, in all material respects, the financial position of QinghaiXining Water Environment Management Project financed by the WorldBank as of December 31, 2018, its financial receipts and disbursements,the project implementation and the receipts and disbursements of thedesignated account for the year then ended in accordance with Chineseaccounting standards and system, and the requirements of the projectloan agreement.

Other Matter

We also examined the withdrawal applications from No.26 to No.35 andthe attached documents submitted to the World Bank during the period.In our opinion, those documents comply with the project loan agreementand can serve as basis for loan withdrawal.

The audit report consists of the Auditor's Opinion and two more partshereinafter: Financial Statements and Notes to the Financial Statements,Audit Findings and Recommendations.

Qinghai Provincial Audit Office of the People's Republic of ChinaMay 28, 2019Address: No.41 Wusi Avenue, Xining, Qinghai, ChinaPostcode: 810001Tel.: 86-0971-6182531Fax: 86-0971-6182500The English translation is for the convenience of report users; Pleasetake the Chinese audit report as the only official version.

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II. Financial Statements and Notes to the Financial Statements

i. Balance Sheet

BALANCE SHEET2018 * 12 A 31 H (For the period ended December 31, 2018)

Project Name: Qinghai Xining Water Environment Management Project Financed by the World Bank

Prepared by: Project Construction Office of Qinghai Xining Water Environment Management ProjectCurrency Unit: RMByuan

t lk & Jfl 1VJVe Jw * i5 *0I 4R*Application of Fund Line Beginning Balance Ending Balance Sources of Fund Line Beginning Balance Ending BalanceNo. No.

Total Project 1 Total Project 28Expenditures 419,818,799.24 542,823,725.83 Appropriation Funds 30,500,000.00 31,500,000.00

Fixed Assets 2 P' 29Transferred Project Capital and

Capital Surplus

Construction 3 30Expenditures to be Including: Grants

Disposed

Investments 4 31Transferred-out - Total Project Loan 343,984,790,33 461,487,175.10

Construction in 5 32Progress 419,818,799.24 542,823,725.83 Total Project Loan 343,984,790.33 461,487,175.10

(I) tITWW WInvestment Loan 6 33,;,,vmReceivable L World Bank Loan 343,984,790.33 461,487,175.10

Including: World Bank 7 Including: IDA 34Investment Loan

Receivable

Appropriation of 8 . 35Investment Loan - - IBRD 343,984,790.33 461.487,175.10

Including: Technical 36Appropriation of World nBank Investment Loan - - Cooperation -

10 RA M 37Equipment Co-Financing

4 kjffiM9 (2) R tIncluding: Equipment 11 38Losses in Suspense - - Domestic Loan 32

12 59,970,951.26 88,373,489.10 2.39 -{.Total Cash and Bank Other Loan

Cah nBak 13 Appropriation of 40Cashin Bank 59,970,951.26 88,373,489.10 Investment Loan

( R To be continued)

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H. Summary of Sources and Uses of Funds by Project Component

A 9L A

SUMMARY OF SOURCES AND USES OF FUNDSBY PROJECT COMPONENT I

*A;A-4i 2018 * 12 M 31 H (For the period ended December 31,2018)

ProjectName: Qinghai Xining Water Environment Management Project Financed by the World Bank f, TW _7,: Ax-f 57q-%#*Ik: Currency Unit: RMByuat

Prepared by.- Pr9ject Construction Office of Qinghai Xining Water Environment Management Project

*JW TZ itCurrent Period Cumulative

*Mato, VA ty A L L 4i IZA*Am

Current year Current period CurrentPeriod Life of Cumulative Cumulative

Budget Actual % completed PAD Actual % Completed

M M lffl*it Total Financing - 118,502,384.77 1,504,154,10000 492,987,17510 33.00%

i - tff:ft World Bank Loan - 117,502,384.77 915,000,000.00 461,487,175.10 5D.00%

2. TE-;t-f E & Counterpart Fund - 1,000,000M 589,154,100,00 31,560,000.00 5.00%

250,000,000M 123,004,926.59 49.00% 1,504,154,100.00 342,823,725.83 36.00%Total Application of Funds

L iR41Nr57xW4Vq3Aq 180,000,000.00 69,481,226.15 39.00% 776,049,600.00 225,452,700.56 29.00%Urban Storm-water collection pipe networkproject2.Low Impact Development and 35,000,000.00 7,424,181.02 21,00% 200,857,100.00 115,751,969,51 58.00%Environmental riparian restoration project3. 20,000,000.00 11,959,326.19 60.00% 158,191,300.00 120,092,589.87 76.00%Ditch comprehensive treatment project4.Wastewater treatment plant water reuse 6,000,000.00 - - 9,625,300.00 -demonstration project5.Institution-building and capacity building 2,200,000.00 561,280.00 26.00% 7,400,000.00 2,170,947.00 29.00%costs6. 1,800,000.00 24,601,058.48 1367,00% 167,679,000.00 60,5 46,837.65 36.00%immigration relocation and other expenses7. fjrj &Vt Contingencies 129,131,00000 - -8. 38!UW 'qt 5,000,000.00 8,978,854.75 180.00% 52,93 9,300,00 16,373,581.24 31.00%Construction period interest93MER Front-endfee - 2,250,700.00 2,435,100.00 108.00%

Initial working capital 30,800.00 -

:K5T Difference 4,502,541.82 -49,836,550.731. Change in Receivable 20,706,059.37 43,321,444.782. ChangeinPayable -53,493,245.74 -181,236,660.613. R if i &3C- Change in Cash and Bank 28,402,537.84 88,373,499.104. -A'L Other -117,893.29 -294,824.00

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(V9.)iv. Designated Account Statement

DESIGNATDE ACCOUNT STATEMENT*,J A _IE 2018 Jf- 12 A 31 H (For the period ended December 31, 2018

Project Name: Qinghai Xining Water Environment Depository Bank: Bank of China Xining City

Management Project Financed by the World Bank branch

1,P 8423-CN W : 105002676254

Loan No. 8423-CN Account No. :105002676254

WR*Ik:

Prepared by: Qinghai Provincial Finance Department Currency: USD

Part A-Account Activity forthe Current Period Amount

Beginning Bala= 5,119,884.48

Win:Add:

*Jw L1 4TRI*,t9l 14,597,067.12Total Amount Deposited this Period by World Bank

Total Interest Eamed this Period if Deposited in Designated Account 2,338.13

* i w T . 4 J Lh M 91 19 91Total Amount Refunded this Period to Cover Ineligible Expenditures

30), ' :Deduct:

Total Amount Withdrawn this Period 13,501,624.91

Total Service Charges this Period if not Included in Above Amount Withdrdwn 10.00

Ending Balance 6,217,654.92

12

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�����������1 ���6.8632 � �Exchange Rate:usDI=RMB6.8632yUaJD

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�������������������8423�cN����������������������������������������������������������(1������������(2����������������(3 ����������(4 �������������(5 ������������������� 15������������������ 1,5 ���������9,15 ��������� 5.89 ���

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��������������2 ������������������������������������������������

3�������3.1 ������������ ��������������

������ �2000�13 ��������

3.2 ������������������ 1 � 1 �� 12 �31 � �

3.3 �����������������������������������������������

3.4 �������� 2018 � 12 � 28 ����� 1 ������6.8632 ����

4�������4.1 ��� �2018 � 12 � 31 ���������� 542,823,725.83 ���

������������������225,452,7��56 �����

14

���������������� 115,751,969.51 ��������������� 12��092,589.87 ������������������2,170,9��00 �������������������60,546,837.65 ������������16,373,581.24 ����������2,435,100.00 ��

4,2 ����2018 � 12 � 31 ������� 88,373,489.1�������

���������42,673,009.25 ��

4.3 ������2018 � 12 � 31 �������43,321,444.78 ��������������������������

24,825,471,38 ����������16,879,351.65 ��������������������������

1,6 16,621.75 � �

4.4 ����2018 � 12 � 31 ������� 31,50��000.0��������

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4.5 ����2018 � 12 � 31 �������461,48?,175.10 �������

������� �� � 67,240,816.95 ������ ��461,487,175.10 � �

4.6 ���2018 � 12 � 31 ������� 181,236,660.61 ������� ����� ���������� ��

10,642,001.00 ������������� 10,642,001.00 ����������������������������

120,681,816.19 �������������9,348,800.67 ���������� 19,876,101.33 ���������� 91,456,914,19� �

I5

��������������������������49,912,843.42 �������������30,072,221.68 ���������� 3,188,761.68 ���������� 16,651,860.06� �

4.7 ����2018 � 12 � 31 ������294,824.00 ���������

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5���������������������������������

105002676254 ���������������� 15,000,000.00 ������� 5,119,884.48 �������� 14,597,067.12 ������� 2,338.13 �������� 13,501,624.81 ������� 6,217,654.92 ���

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v. Notes to the Financial Statements

Notes to the Financial Statements

1. Project Overview

The Loan No. of the World Bank financed Qinghai Xining WaterEnvironment Management Project i§ 8423-CN. It aims to improve urbanfacilities of water environment, reduce water pollution and pilot theexploration of potential sustainable reuse of wastewater in the XiningMunicipality. It can be achieved through the five compo ' nents as follows:a) Construction of storm-water and wastewater collection pipelinenetworks in the urban area; b) low-impact development and riverbankenvironment restoration; c) Integrated gully and canal improvement; d)Piloting the sustainable reuse of treated wastewater in sewage plants; ande) Institutional capacity building. The total investment plan of the projectwas RMB1,504,000,000.00 yuan, among which the total InternationalBank of Reconstruction & Development loan amount wasUSD 150,000,000, equivalent to RMB915,000,000 yuan, and the domesticcounterpart fund amount was RMB589,000,000 yuan.

2. Consolidation Scope of the Financial Statements

Consolidation scope of the financial statements covers the financialstatements of the project construction office of the Qinghai Xining WaterEnvirom-nent Management Project Financed by the World Bank, 2 projectexecuting entities-Xining Huangshui Investment Management Co.,Ltdand Xining Drainage Construction & Development Co.,Ltd, as well as theSpecial Account set in the Provincial Finance Bureau.

3. Accounting Policies

3.1 The Financial Statements of the project were prepared according tothe requirements of Accounting Methods for the World Bank FinancedProject (Caijizi[2000]No.13)

3.2 In accounting practice, the Gregorian calendar year is adopted as thefiscal year from January I to December 3 1.

3.3 The accrual basis and the debit/credit double entry bookkeepingmethod are adopted. RMB is used as the recording currency of

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bookkeeping.

3.4 The exchange rate adopted in the financial statements was theexchange rate on December 28, 2018 of the People's Bank of China,which is USD1= RMB6.8632 yuan.4. Explanation of Subjects4.1 Total Project Expenditures

The cumulative expenditures till December 31, 2018 wereRMB542,823,725.83 yuan, among which RMB225,452,700.56 yuan wasfor construction of Storm-water-water and wastewater collection pipelinenetworks in the urban area; RMB115,751,969.51 yuan for low-impactdevelopment and riverbank environment restoration; RMB120,092,589.87 yuan for integrated gully and canal improvement;RMB2,170,947.00 yuan for institutional capacity building; RMB60,546,837.65 yuan for resettlement and other Category B costs; RMB16,373,581.24yuan for interest during construction; and RMB2,435,100.00 yuan for front-end fee.

4.2 Cash and BankOn December 31, 2018, the balance was RMB88,373,489.10 yuan. Andthe funds in the Special Account were converted into RMB42,673,009.25yuan.

4.3 Prepaid and Receivable

Its balance on December 31, 2018 was RMB43,321,444.78 yuan.

The project implementing entity, namely, Xining Huangshui InvestmentManagement Co.,Ltd had an engineering advance payment of RMB24,825,471.38 yuan, and there were other receivables of RMB16,879,351.65 yuan.

The project implementing entity, namely, Xining Drainage Construction& Development Co.,Ltd had an engineering advance payment ofRMBI,616,621.75 yuan.

4.4 Project Appropriation Funds

The balance on December 31, 2018 was RMB30,500,000.00 yuan, whichwas the counterpart funds allocated by the municipal level.

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4.5 Project Loan

The balance on December 31, 2018 was RMB461,487,175.10 yuan,including the IBRD loan USD67,240,816.95 yuan, equivalent toRMB461,48,175.10 yuan.

4.6 Payable

The balance on December 31, 2018 vas RMB181,236,660.61 yuan.

The Project Construction Office of Qinghai Water EnvironmentManagement Project had a year-end payable balance ofRMB10,642,001.00 yuan, of which there was RMB10,642,001.00 yuanof other payables.

The project implementing entity, namely, Xining Huangshui InvestmentManagement Co.,Ltd had a year-end payable balance ofRMBl20,681,816.19 yuan, of which there were RMB9,348,800.67 yuanof engineering charge, RMB19,876,101.33 yuan of performance securityfund payable, RMB91,456,914.19 yuan of other payables.

The project implement implementing entity, namely, Xining DrainageConstruction & Development Co.,Ltd had a year-end payable balance ofRMB49,912,843.42 yuan, of which there were RMB30,072,221.68 yuanof engineering charge, RMB3,188,761.68 yuan of performance securityfund payable, RMB16,651,860.06 yuan of other payables.

4.7 Retained Earnings

The balance on December 31, 2018 was RMB294,824.00 yuan, mainlyinterest income earned from bank deposits.

5. Special Account

The Special Account of this project is set in the Xining Shengli Branch,Bank of China, with the account number of 105002676254 and USD asthe currency Unit. The initial deposit of the Special Account isUSD15,000,000. The beginning balance of 2018 was USD5,119,884.48and the reimbursement in the year was USD14,597,067.12. This year theinterest earned was USD2,338.13 and the disbursement wasUSD13,501,624.81. Thus, the ending balance was USD 6,217,654.92.

6. Other Explanation for the Financial Statements

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Due to the change of foreign exchange rate, there are discrepanciesbetween the difference of the beginning and ending balance of the IBRDloan in the Balance Sheet, the current year's loan received in theSummary of Sources and Uses of Funds by Project Component and theamount of current year's withdrawals (disclosed in RMB) in theStatement of Implementation of Loan Agreement.

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