U Nexia WSTT W U Results-based Operation for Local Bridge Construction and Road Asset Management Component 2 - Local Bridge Construction Audited Financial Statements Under the Financing Agreement No. 5810-VN between the International Development Association and the Government of the Socialist Republic of Vietnam For the period from 4 October 2016 to 31 December 2017 2 U Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
Transcript
UNexia
WSTT
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Results-based Operation for Local Bridge Construction andRoad Asset Management
Component 2 - Local Bridge Construction
Audited Financial Statements
Under the Financing Agreement No. 5810-VN between theInternational Development Association and the Government of theSocialist Republic of Vietnam
For the period from 4 October 2016 to 31 December 2017
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Wg Results-based Operation for Local Bridge Construction and Road Asset
ManagementComponent 2 - Local Bridge ConstructionUnder the Financing Agreement No. 5810-VN between the International Development Associationand the Government of the Socit RepublIc of Vietnam
Contents
STATEMENT OF THE COMPONENT MANAGEMENT BOARD....................................2
CONSOLIDATED STATEMENT OF SOURCES AND USES OF FUNDS ...................... 12
STATEMENT OF DESIGNATED ACCOUNT...........................................................13
SOE WITHDRAWAL SCHEDULE - ACCOUNT NO. 174297....................................14
NOTES TO THE FINANCIAL STATEMENTS..........................................................15
g Results-based Operation for Local Bridge Construction and Road AssetManagementComponent 2 - Local Bridge ConstructionUnder the Financing Agreement No. 5810-VN between the International Development Associationand the Government of the Socallst Republic of Vietnam
STATEMENT OF THE COMPONENT MANAGEMENT BOARD
Project Management Unit 3 was assigned by the Ministry of Transport as the Owner Representativefor Component 2 - Local Bridge Construction of the Project "Results-based Operation for LocalBridge Construction and Road Asset Management" ("the Component 2") using the World Bank'scredit and the counterpart funds from the Government of Vietnam. Project Management Unit 3 ("theComponent Management Unit") is responsible for the Financial Statements of Component 2 - LocalBridge Construction of the Project "Results-based Operation for Local Bridge Construction and RoadAsset Management" ("the Project") for the period from 4 October 2016 to 31 December 2017.
The Project
The Project "Results-based Operation for Local Bridge Construction and Road Asset Management"was implemented by the Ministry of Transport (MOT) - the Socialist Republic of Vietnam accordingto Decision No. 330/QD-TTg dated 2nd March 2016 signed by the Prime Minister of the SocialistRepublic of Vietnam and Decision No. 622/QD-BGTVT dated 2 March 2016 signed by the Minister ofMOT. The Project was granted by the World Bank's credit through International DevelopmentAssociation ("IDA") under the Financing Agreement No. 5810-VN dated 4 July 2016, with the totalamounts equivalent to 278,800,000 Special Drawing Rights ("SDR"), and the counterpart funds fromthe Government of the Socialist Republic of Vietnam for seven (7) years from 2016 to 2023.
The overall objective of the Project is to assist the Government and the Ministry of Transport in theNational Strategy on Rural Transport Development and a National Program for Local BridgeConstruction to ensure traffic safety in Ethnic Minority Areas and to improve access in rural areaswith low accessibility, especially for areas where poor ethnic minority communities are located aswell as other vulnerable groups such as single women and children.
The Project consists of: (i) A Program using the Results-Based Program (PforR) instrument (theProgram), supported by a IDA credit of USD380.5 million; and (ii) Technical Assistance (the Project)using the Investment Project Financing (IPF) instrument, supported by a IDA credit of USD4.5million.
The Project's objectives are achieved by implementing the following components:
- Component 1: Improvement, rehabilitation of local roads (managed by Project ManagementUnit 6);
- Component 2: Local Bridge Construction (managed by Project Management 3); and
- Technical Assistance Component (managed by Project Management 6).
A Program using the PforR instrument to assist the Government's program, consisting of two (2)Components 1 and 2 of the Project.
Component 1 - Improvement, rehabilitation of local roads has been managed by the ProjectManagement Unit 6 and implemented in 14 provinces, including: Lao Cai, Ha Giang, Nam Dinh,Thanh Hoa, Nghe An, Ha Tinh, Quang Binh, Bac Kan, Quang Tri, Thua Thien Hue, Quang Nam,Lang Son, Cao Bang and Binh Dinh. The Component's objective is to provide support to the NationalStrategy for Rural Transport Development, through: (a) strengthening its institutional capacity toplan, implement and improve maintenance activities of the local road network; and (b) theimprovement, rehabilitation, periodic and rountine maintenance of local roads based upon rollingMedium Term Expenditure Plans.
* 2
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g Results-based Operation for Local Bridge Construction and Road AssetManagementComponent 2 - Local Bridge ConstructionUnder the Financing Agreement No. 5810- VN between the International Development Associationand the Government of the Socalt Republic of Vietnam
M STATEMENT OF THE COMPONENT MANAGEMENT BOARD (CONTINUED)
* Component 2 - Local Bridge Construction has been managed by the Project Management Units 3, 4,6 and 8 and implemented in 50 provinces, including: Ha Giang, Cao Bang, Lai Chau, Dien Bien, Son
IN La, Lao Cai, Yen Bai, Lang Son, Bac Kan, Tuyen Quang, Thai Nguyen, Phu Tho, Hoa Binh, QuangNinh, Thanh Hoa, Nghe An, Ha Tinh, Quang Binh, Quang Tri, Thua Thien Hue, Quang Nam, Quang
* Ngai, Binh Dinh, Gia Lai, Kon Tum, Dak Lak, Dak Nong, Lam Dong, Bac Giang, Vinh Phuc, NinhBinh, Hai Duong, Phu Yen, Ninh Thuan, Khanh Hoa, Binh Thuan, Binh Phuoc, Tra Vinh, Dong Nai,
* Vinh Long, Hau Giang, Kien Giang, An Giang, Soc Trang, Bac Lieu, Ca Mau, Tay Ninh, Can Tho,Dong Thap and Ben Tre. The Component's objective is to provide support to the National Strategy
M for Rural Transport Development, through: (a) the construction of small bridges in poor and ethnicminority communities and villages with missing or unsafe links in order to facilitate access to social
* services, schools, and clinics within the local road network; and (b) strengthening of localcommunities' capacity to carry out bridge maintenance activities.
The Technical Assistance Component implemented by Project Managment Unit 6, consisting of* activities that are necessary to complete the PforR, namely activities related to: (a) auditing the
Program; (b) improving the capacity of implementing agencies in environmental and socialmanagement; and (c) the Local Road Asset Management Systems support, climate resilience in theroad network, and community and women based road maintenance.
* Component Management Board
* The members of the Component Management Board are responsible for the management of theComponent 2 - Local Bridge Construction of the Project during the period and at the date of this
M report are as follows:
* Mr. Nguyen Xuan Truong DirectorMr. Le Duc Loc Deputy Director
* Mr. Nguyen Tien Dat Chief AccountantMr. Do Van Dang Head of Project Implementation Department 2
* Auditors
* The accompanying Financial Statements for the period from 4 October 2016 to 31 December 2017
have been audited by NEXIA STT Co., Ltd.
* Responsibility of the Component Management Board in respect of the FinancialStatements
The Component Management Board is responsible for the Financial Statements which give a true* and fair view of the financial position and designated account balance of the Component 2 - Local
Bridge Construction as at 31 December 2017 and of its sources and uses of funds, operations of* designated account and total funds withdrawn for the period from 4 October 2016 to 31 December
2017. In preparing the Financial Statements, the Component Management Board is required to* select suitable accounting policies and then apply them consistently.
UU* 3
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g Results-based Operation for Local Bridge Construction and Road AssetManagementComponent 2 - Local Bridge ConstructionUnder the Financing Agreement No. 5810- VV between the International Development Assoclationand the Government of the Socialist Republic of Vietnam
STATEMENT OF THE COMPONENT MANAGEMENT BOARD (CONTINUED)
The Component Management Board is responsible for ensuring that proper accounting records arekept which enable the Financial Statements to be prepared in compliance with the accountingpolicies set out in Note 2 to the Financial Statements. The Component Management Board is alsoresponsible for safeguarding the assets of the Component 2 and hence for taking reasonable stepsfor the prevention and detection of fraud and other irregularities.
The Component Management Board assumes the responsibility to provide, and has provided, theauditors with all accounting records, supporting and other documents, minutes, any pertinentinformation and explanations, either orally or by written confirmation, necessary for the audit.
Approval of the Financial Statements
We hereby approve the accompanying Financial Statements of the Project "Results-based Operationfor Local Bridge Construction and Road Asset Management" - Component 2 - Local BridgeConstruction on pages 11 to 22 which give a true and fair view of the financial position anddesignated account balance as at 31 December 2017 and its sources and uses of funds, operationsof designated account and total funds withdrawn during the period from 4 October 2016 to 31December 2017 in accordance with the accounting policies as described in Note 2 to the FinancialStatements and grant withdrawals have been adequately reconciled to the statements ofexpenditures prepared by the Component during the period, and such statements of expenditureswere adequately supported. The Financial Statements were prepared in compliance with theApplicable Provisions of the Agreement and other Guidance from the World Bank.
On behalf of the Component Management Board41
Mr. Nguyen Xuan TruongDirector
Hanoi, 25 July 2018
U4
UHanoi OfficeN ex a X18 Fl.. C Land Tower, 156 Xa Dan II. Dong Da. Hanoi
P: +84 (24) 3 935 0990 - F: +84 (24) - 935 0991
STT Hochil City Office9 Fl., Estar Building, No 147-149 - . van Tan
To: The Management Board of Project "Results-based Operation for Local Bridge Constructionand Road Asset Management"Component 2 - Local Bridge Construction
Audit opinion
We have audited the accompanying Balance Sheet as at 31 December 2017, the ConsolidatedStatement of Sources and Uses of Funds, the Statement of Designated Account and the SOEWithdrawal Schedule for the period from 4 October 2016 to 31 December 2017 (collectively referredto as the "Financial Statements") of the Project "Results-based Operation for Local BridgeConstruction and Road Asset Management" - Component 2 - Local Bridge Construction ("theComponent 2") implemented by World Bank's credit through International Development Association("IDA") and counterpart funds, and summary of significant accounting policies and otherexplanatory information.
In our opinion, in all material respects:
a) the Balance Sheet and the Consolidated Statement of Sources and Uses of Funds give a trueand fair view of the financial position of the Component 2 as at 31 December 2017 and of itssources and uses of funds for the period from 4 October 2016 to 31 December 2017 inconformity with the accounting policies described in Note 2;
b) the Statement of Designated Account and the SOE Withdrawal Schedule give a true and fairview of the designated account balance as at 31 December 2017 and of operations of thedesignated account, and of the funds withdrawn for the period from 4 October 2016 to 31December 2017, in conformity with the accounting policies described in Note 2; and
c) the Statements of Expenditures and Summary Sheets are fully prepared and maintained withadequate supporting documents to support for the replenishment requests submitted to theWorld Bank. Funds disbursed through the statements of expenditures and summary sheets areutilized for purposes defined in the Financing Agreement No. 5810-VN.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing ("ISAs"). Ourresponsibilities under those standards are further described in the Audtitor's Responsibilities for the
lAudit of the Financia Statements section of our report. We are independent of the Component 2 inaccordance with the ethical requirements that are relevant to our audit of the Financial Statementsin accordance with ISAs, and we have fulfilled our other ethical responsibilities in accordance withthese requirements. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our opinion.
@2015 N aaIternaxI tiron Lim,ted Al rIg r .Nexia Inter1,at onals a eadirg worldide etwork of cfindpendent account h nd consultr se por of a c cy. tax and advisoy services. Nea intera a
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Responsibilities of Component Management for the Financial Statements
Component Management is responsible for the preparation and fair presentation of the FinancialStatements in accordance with Note 2 and for such internal control as management determines isnecessary to enable the preparation of Financial Statements that are free from materialmisstatement, whether due to fraud or error.
Auditors' Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the Financial Statements of theComponent 2 as a whole are free from material misstatement, whether due to fraud or error, and toissue an auditors' report that includes our opinion. Reasonable assurance is a high level ofassurance, but is not a guarantee that an audit conducted in accordance with ISAs will alwaysdetect a material misstatement when it exists. Misstatements can arise from fraud or error and areconsidered material if, individually or in the aggregate, they could reasonably be expected toinfluence the economic decisions of users taken on the basis of these Financial Statements.
A further description of the auditors' responsibilities for the audit of the Financial Statements areincluded in Appendix I of this auditors' report. This description, which is represented at page 23,forms part of our auditors' report.
NEk*.,r Ltd.Nguyer ]-i
General DirectorAudit Practicing Registration CertificateNo. 0518-2018-225-1
Audit report No.: 2018/HN-AU/WB-LRAMP
Hanoi, 25 July 2018
6
Hanoi OfficeN exia 18 FL. C land Tower, 156 Xa Dan il, Dong Da, HanoiP: +84 (24 3 935 0990 - F: +84 (24) Z 935 0991
STTHochirnih City Ofice9 FL., Est.r Building. No.147-149 V, anTan
INDEPENDENT AUDITORS' REPORTOn Compliance with the Applicable Laws, Regulations, Procurement Procedures
and Other Provisions of the Financing Agreements
To: The Management Board of Project "Results-based Operation for Local Bridge Constructionand Road Asset Management"Component 2 - Local Bridge Construction
Audit opinion
We have audited the Compliance with the Applicable Laws, Regulations, Procurement Proceduresand Other Provisions of the Financing Agreement No. 5810-VN of the Project "Results-basedOperation for Local Bridge Construction and Road Asset Management" - Component 2 - LocalBridge Construction ("the Component 2") implemented by World Bank's credit through InternationalDevelopment Association ("IDA") and counterpart funds for the period from 4 October 2016 to 31December 2017.
In our opinion, the Component 2 was, in all material respects, in compliance with the applicablelaws, regulations, the procurement procedures and other provisions of Financing Agreement No.5810-VN that could have a direct and material effect on the Component 2's Financial Statements forthe period from 4 October 2016 to 31 December 2017.
Basis for Opinion
We conducted our engagement in accordance with International Standards on AssuranceEngagements 3000, "Assurance Engagements other than Audits or Reviews of Historical FinancialInformation", issued by the International Auditing and Assurance Standards Board. Ourresponsibility is to express an opinion on the Component 2's compliance with the requirements,based on our procedures. We are independent of the Component 2 in accordance with the ethicalrequirements that are relevant to our audit of the financial statements in accordance with ISAs, andwe have fulfilled our other ethical responsibilities in accordance with these requirements. We believethat the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Responsibilities of Component Management
The Component Management Board is responsible for compliance with the Applicable Laws,Regulations, Procurement Procedures and Other Provisions of the Financing Agreement No. 5810-VN that could have a direct and material effect on the Financial Statements for the period from 4October 2016 to 31 December 2017.
@c 2015 NexamiternationalIL,mited. A!r.ghr servedbNexia Internationa Is, a Ieaing wor-did ey networkt ofn ndepen-et accoun- n nd rosuri 1 1 P,, proid mpee v otfI o f-auit acon ncy.tax andadvisory servces. NexiaInt-rna.ionais the tradinb name of Nexia bnte,natbon-I Limtited. a comp-n reg strdteI sl oF Mn o pn e t n 553 eitroft 1 s foor Sixtv C-rcuar Road Douglas Ie of Man,IM1 15A, The traemrk NEXIIA I NTER NATIONAL, NEXIA,and-h, NEXA og are owne byN sa o e; ne taal and - ru r frms a,re no t tf,a worldwide p,rtnersipMember firms of Nex,a Internana-1 rende,pendently own and op3ae Nxa mnternr ant ae oacptnyepo i biy a-rth o mis a of any act. or om-sio to act by, o- the iabilht-sof, any of tts members.
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Auditors' Responsibilities
Our responsibility is to express an opinion on the Component 2's compliance with the requirements,based on our procedures. We conducted our engagement in accordance with InternationalStandards on Assurance Engagements 3000, "Assurance Engagements other than Audits or Reviewsof Historical Financial Information", issued by the International Auditing and Assurance StandardsBoard. That standard requires that we comply with ethical requirements, plan and perform ourprocedures to obtain reasonable assurance about whether, in all material respects, the Component2 has complied with the requirements.
An assurance engagement to report on the compliance with regulatory and contractualrequirements at a Component 2 involves performing procedures to obtain evidence about whetherthe Component 2's activities are free of material noncompliance with the requirements. Theprocedures selected depend on the auditor's judgment, including the assessment of risks that theComponent 2 does not comply with the requirements and whether such noncompliance could havea direct and material effect on the Component 2's Financial Statements. Our procedures includedtesting the compliance with the requirements that we consider necessary to provide reasonableassurance that the requirements are complied by the Component 2.
fw Nexia c18 FI., C Land Tovr, 156 Xa Dan II, Dong Da Hanoi
P : +84 (24) 3 935 0990 - F: +84 (24) 3 935 0991STT HohmnhCt-Ofc9 FIL, Estar Building, No.147 149 V: van Tan
Ward 6, District 3, Hoch,n in CityP: +84 (28) 39 300 488 - F: +84 (28) 39 300 484
E: nexiastt(i0nexia.vn W: wwv.n)ex a.vn
INDEPENDENT AUDITORS' REPORTOn the effectiveness of internal control over compliance with requirements
that could have a direct and material financial effect on the Financial Statementsas well as of internal control over financial reporting
To: The Management Board of Project "Results-based Operation for Local Bridge Constructionand Road Asset Management"Component 2 - Local Bridge Construction
Qualified opinion
We have audited, in accordance with International Standards on Auditing, the Financial Statements ofthe Project "Results-based Operation for Local Bridge Construction and Road Asset Management" -Component 2 - Local Bridge Construction ("the Component 2") implemented by World Bank's creditthrough International Development Association ("IDA") and counterpart funds for the period from 4October 2016 to 31 December 2017 and issued the auditors' report thereon expressing an unqualifiedopinion on those Financial Statements.
In connection with our audit of the Financial Statements, we also examined the effectiveness ofinternal control over compliance with requirements that could have a direct and material financialeffect on the Financial Statements as well as of internal control over financial reporting.
In our opinion, except for the possible effects of the matter described in the "Basis for QualifiedOpinion" paragraph, the Component 2 has maintained, in all material respects, effective internalcontrol over compliance with requirements that could have a direct and material financial effect onthe Financial Statements as well as of internal control over financial reporting for the period from 4October 2016 to 31 December 2017.
Basis for Qualified opinion
Project Management Unit 8 has not established or maintained any effective control system of cash atbank. Specifically, the PMU8 did not maintain any separate bank account for warranty retentions fromcontractors but commingled such amounts with other projects' at the Martitime Bank - Ho Chi MinhBranch.
We conducted our engagement in accordance with International Standards on AssuranceEngagements 3000. Our responsibility is to express an opinion on the effectiveness of internal controlover compliance with requirements that could have a direct and material effect on the FinancialStatements as well as internal control over financial reporting based on our examination. We areindependent of the Component 2 in accordance with the ethical requirements that are relevant auditevaluates the effectiveness of internal controls on the compliance of the requirements that maydirectly and materially affect the financial statements as well as internal control purposes inpreparation of financial statements in Vietnam, and we have fulfilled our other ethical responsibilitiesin accordance with these requirements. We believe that the evidence we have obtained is sufficientand appropriate to provide a basis for our qualified opinion.
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Responsibilities of Component Management
The Component management is responsible for designing and maintaining effective internal controlover compliance with requirements that could have a direct and material effect on the FinancialStatements as well as over financial reporting for the purpose of properly preparing and presentingthe financial statements so as to minimize errors and frauds; and take responsibility for its assertionsas to the effectiveness of such internal control.
Auditors' Responsibilities
Our responsibility is to express an opinion on the effectiveness of internal control over compliancewith requirements that could have a direct and material effect on the Financial Statements as well asinternal control over financial reporting based on our examination.
Our examination was conducted in accordance with International Standard on AssuranceEngagement 3000, accordingly, included obtaining an understanding of internal control overcompliance with requirements that could have a direct and material effect on the FinancialStatements as well as of internal control over financial reporting, testing, and evaluating the designand operating effectiveness of the internal control, and performing such other procedures as weconsidered necessary in the circumstances to obtain sufficient appropriate evidence on which to baseour opinion.
Because of inherent limitations of internal control over financial reporting, including the possibility ofcollusion or improper management override of controls, material misstatements due to error orfraud may occur and not to be prevented or detected on a regular basis. Also, projections of anyevaluation of the effectiveness of the internal control over financial reporting to future periods aresubject to the risk that controls may become inadequate because of changes in conditions, or thatthe degree of compliance with the policies or procedures may deteriorate.
g Results-based Operation for Local Bridge Construction and Road AssetManagementComponent 2 - Local Bridge ConstructionUnder the Financing Agreement No. 5810- VN between the International Development Association andthe Government of the Socialist Republic of Vietnam
BALANCE SHEETAs at 31 December 2017
As atNote 31/12/2017
VNDASSETS
Current assets 314,195,606,248Cash on hand 3 526,440,300Cash at bank - Designated Account 4 -Cash at bank - State Treasury 5 72,857,125Cash at bank - Commercial Bank Account 6 1,039,569,650Advances to contractors/suppliers 7 308,699,574,173Other advances 8 3,857,165,000
TOTAL ASSETS 314,195,606,248
URESOURCES
UCurrent liabilities 24,507,400,420
Payables to contractors 9 23,980,960,120Other payables 10 526,440,300
Fund balance 289,688,205,828Fund balance, end of the period 16 289,688,205,828
TOTAL RESOURCES 314,195,606,248
Prepared by: Approved by:
Nguyen Tien Dat Nguyen Xuan TruongChiefAccountant Director
Hanoi, 25 July 2018
N
The accompanying notes form an integral part of the Fnancial Statements11
Ug Results-based Operation for Local Bridge Construction and Road Asset
ManagementComponent 2 - Local Bridge ConstructionUnder the Financing Agreement No. 5810-VN between the International Development Association andthe Government of the Socia/st Republic of Vietnam
CONSOLIDATED STATEMENT OF SOURCES AND USES OF FUNDSFor the period from 4 October 2016 to 31 December 2017
Periodfrom 4/10/2016
to 31/12/2017VND
SourcesFunds received from the World Bank 11 541,577,109,570Counterpart funds 12 12,159,700,000
553,736,809,570
Uses of funds1. Civil works 13 178,530,546,1502. Consultants on construction investment, other expenses 14 77,215,522,5923. Project management expenses 15 8,302,535,000
264,048,603,742
Fund balance, end of the period 16 289,688,205,828
Prepared by: Approved by:
Nguyen Tien Dat Nguyen Xuan TruongChief Accountant Director
Hanoi, 25 July 2018
N
The accompanyIng notes form an Integra/ part of the Fnancial Statements12
Mg Results-based Operation for Local Bridge Construction and Road Asset
ManagementComponent 2 - Local Bridge ConstructionUnder the Financing Agreement No. 5810-VN between the International Development Association andthe Government of the Socialst Republic of Vietnam
STATEMENT OF DESIGNATED ACCOUNTFor the period from 4 October 2016 to 31 December 2017
Account No.: 174297Account holder: Local Bridge Construction and Road Asset Management (WB)Bank: Transaction Head Office - State Bank of VietnamAddress: No. 49 Ly Thai To, Hoan Kliem district, HanoiFinancing Agreement No.: 5810-VN
Part A - Account activities Thuy&tminh USD
Balance as at 4 October 2016Add:
Total amount advanced to the Designated Account 11 24,129,745.00Deduct:
Total amount withdrawn (24,129,745.00)
Balance as at 31 January 2018 4
Part B - Account reconciliation
Amount advanced from the World BankAdd:
Amount advanced by the World Bank 24,129,745.00
Outstanding amount advanced to the Designated Account as at 31 24,129,745.00January 2018
Balance of Designated Account as at 31 January 2018 4
Add:Amount withdrawn and not yet claimed 17 24,129,745.00
Total advances to Designated Account as at 31 January 2018 24,129,745.00
Prepared by: Approved by:
Nguyen Tien Dat Nguyen Xuan TruongChief Accountant DIrector
Hanoi, 25 July 2018
UThe accompanying notes form an integral part of the Financl Statements
13W
Results-based Operation for Local Bridge Construction and Road AssetManagementComponent 2 - Local Bridge ConstructionUnder the Financing Agreement No. 5810-VN between the International Development Associationand the Government of the Socalst Republic of Vietnam
SOE WITHDRAWAL SCHEDULE - ACCOUNT NO. 174297For the period from 4 October 2016 to 31 December 2017
Unit.- Use
Withdrawal applications CategoriesNo. Date Advances
Nguyen Tien Dat Nguyen Xuan TruongChief Accountant Director
Hanoi, 25 July 2018
The accompanyIng notes form an Integral part of the Fnancial Statements
14
Wg Results-based Operation for Local Bridge Construction and Road Asset
ManagementComponent 2 - Local Bridge ConstructionUnder the Financing Agreement No. 5810-VN between the International Development Association andthe Government of the Socialst Republic of Vietnam
NOTES TO THE FINANCIAL STATEMENTSFor the period from 4 October 2016 to 31 December 2017
1. Project backgroundThe Project "Results-based Operation for Local Bridge Construction and Road Asset Management"was implemented by the Ministry of Transport (MOT) - the Socialist Republic of Vietnam according toDecision No. 330/QD-TTg dated 2 nd March 2016 signed by the Prime Minister of the SocialistRepublic of Vietnam and Decision No. 622/QD-BGTVT dated 2 March 2016 signed by the Minister ofMOT. The Project was granted by the World Bank's credit through International DevelopmentAssociation ("IDA") under the Financing Agreement No. 5810-VN dated 4 July 2016, with the totalamounts equivalent to 278,800,000 Special Drawing Rights ("SDR"), and the counterpart funds fromthe Government of the Socialist Republic of Vietnam for seven (7) years from 2016 to 2023.
The overall objective of the Project is to assist the Government and the Ministry of Transport in theNational Strategy on Rural Transport Development and a National Program for Local BridgeConstruction to ensure traffic safety in Ethnic Minority Areas and to improve access in rural areaswith low accessibility, especially for areas where poor ethnic minority communities are located aswell as other vulnerable groups such as single women and children.
The Project consists of: (i) A Program using the Results-Based Program (PforR) instrument (theProgram), supported by a IDA credit of USD380.5 million; and (ii) Technical Assistance (the Project)using the Investment Project Financing (IPF) instrument, supported by a IDA credit of USD4.5million.
The Project's objectives are achieved by implementing the following components:
- Component 1: Improvement, rehabilitation of local roads (managed by Project ManagementW Unit 6);
* - Component 2: Local Bridge Construction (managed by Project Management 3); and
* - Technical Assistance Component (managed by Project Management 6).
* A Program using the PforR instrument to assist the Government's program, consisting of two (2)Components 1 and 2 of the Project.
Component 1 - Improvement, rehabilitation of local roads has been managed by the Project* Management Unit 6 and implemented in 14 provinces, including: Lao Cai, Ha Giang, Nam Dinh,
Thanh Hoa, Nghe An, Ha Tinh, Quang Binh, Bac Kan, Quang Tri, Thua Thien Hue, Quang Nam, Lang* Son, Cao Bang and Binh Dinh. The Component's objective is to provide support to the National
Strategy for Rural Transport Development, through: (a) strengthening its institutional capacity toU plan, implement and improve maintenance activities of the local road network; and (b) the
improvement, rehabilitation, periodic and rountine maintenance of local roads based upon rollingW Medium Term Expenditure Plans.
15
Results-based Operation for Local Bridge Construction and Road AssetManagementComponent 2 - Local Bridge ConstructionUnder the Financing Agreement Vo. 5810- VV between the International Development Associatlon andthe Government of the Socialst Republic of Vietnam
Component 2 - Local Bridge Construction has been managed by the Project Management Units 3, 4,6 and 8 and implemented in 50 provinces, including: Ha Giang, Cao Bang, Lai Chau, Dien Bien, SonLa, Lao Cai, Yen Bai, Lang Son, Bac Kan, Tuyen Quang, Thai Nguyen, Phu Tho, Hoa Binh, QuangNinh, Thanh Hoa, Nghe An, Ha Tinh, Quang Binh, Quang Tri, Thua Thien Hue, Quang Nam, QuangNgai, Binh Dinh, Gia Lai, Kon Tum, Dak Lak, Dak Nong, Lam Dong, Bac Giang, Vinh Phuc, Ninh Binh,Hai Duong, Phu Yen, Ninh Thuan, Khanh Hoa, Binh Thuan, Binh Phuoc, Tra Vinh, Dong Nai, VinhLong, Hau Giang, Kien Giang, An Giang, Soc Trang, Bac Lieu, Ca Mau, Tay Ninh, Can Tho, DongThap and Ben Tre. The Component's objective is to provide support to the National Strategy forRural Transport Development, through: (a) the construction of small bridges in poor and ethnicminority communities and villages with missing or unsafe links in order to facilitate access to socialservices, schools, and clinics within the local road network; and (b) strengthening of localcommunities' capacity to carry out bridge maintenance activities.
The Technical Assistance Component implemented by Project Managment Unit 6, consisting ofactivities that are necessary to complete the PforR, namely activities related to: (a) auditing theProgram; (b) improving the capacity of implementing agencies in environmental and socialmanagement; and (c) the Local Road Asset Management Systems support, climate resilience in theroad network, and community and women based road maintenance.
2. Summary of significant accounting policies
The significant accounting policies, which have been adopted by the Component ManagementBoard in the preparation of the Financial Statements, are as follows:
Reporting currency
The Financial Statements, including the Balance Sheet and the Consolidated Statement of Sourcesand Uses of Funds are expressed in Vietnam Dong ("VND"), except for the Statement of DesignatedAccount and SOE Withdrawal Schedule which are expressed in United States Dollar ("USD"), areprepared considering the requirements of World Bank.
Basis of preparation of the Financial Statements
The Financial Statements are prepared and presented by the Component in accordance withrequirements of the World Bank (WB), complied with Vietnamese Accounting Standards and CircularNo. 195/2012/TT-BTC dated 15 November 2012 issued by the Ministry of Finance guiding theaccounting regime applicable to investors. The financial statements are prepared on modified cashbasis under the financial year regulated by the Vietnamese Government, including payments inJanuary of the following year for expenditures incurred before 31 December of the prior year. Thisbasis of accounting is considered appropriate to the operation of Component by the management.
Funds
IDA funds are recorded when credited to the Designated Account of the Component.
The counterpart funds of the Vietnamese Government are recorded when payments are madedirectly from the Vietnamese Government to contractors/suppliers of the Component or whenreceived.
The funds are recorded under the budget year, including payments from IDA funds and counterpartfunds in January of the following year for expenditures incurred before 31 December of the prioryear.
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g Results-based Operation for Local Bridge Construction and Road AssetManagementComponent 2 - Local Bridge ConstructionUnder the Financing Agreement No. 5810-VN between the International Deve/opmentAssociation andthe Government of the Socia/lst Republic of Vietnam
Expenditures
Expenditures financed by IDA are recorded when the obligation to pay them arises rather than whenactually paid.
Expenditures financed by the counterpart funds are recorded when they are approved by the StateTreasury except for expenditures for contractors/suppliers on completion of works or completion ofcontracts, and advances to staffs, advances to contractors/suppliers.
Overall management expenses are recognized and monitored by functional Project ManagementUnits for all projects managed by functional Project Management Units, then allocated to individualprojects in accordance with their corresponding annual budget, ensuring that accumulatedmanagement expenses of each Project do not exceed its overall approved budget.
g Fiscal year
* The first fiscal period of the Component is from 4 October 2016 to 31 December 2017 for completionvolume of works/contracts and from 4 October 2016 to 31 January 2018 for disbursements volume.
* Succeeding fiscal years will be from 1 January to 31 December for completion volume ofworks/contracts and to 31 January of the following year for disbursements volume.
UA
* Foreign exchange differences
IDA funds received in United States Dollar ("USD") are converted into Vietnam Dong ("VND") underthe exchange rate ruled by the Ministry of Finance in the funds withdrawal month.
Transactions incurred in the year via the Designated Account are converted into VND usingexchange rates ruled by the Project bank at the dates of transaction for expenditures denominatedin VND and using exchange rates ruled by the Ministry of Finance at the months of transaction forexpenditures denominated in USD.
N Foreign exchange differences are taken up in the Consolidated Statement of Sources and Uses ofFunds.
Designated Account
Designated Account is a deposit account in USD opened at Transation Head Office - State Bank ofVietnam, which was held by the Ministry of Finance for settlements of the Component 2's activities.Payments made via Designated Account are for eligible expenditures of the Component inaccordance with provisions of the Financing Agreement No. 5810-VN dated 4 July 2016.
3. Cash on hand
This represented net cash income from selling bidding documents of Project Management Unit 6 asat 31 December 2017. Such amounts are to cover bidding related expenses in the next years orrefunded to the State Budget after the Project is closed.
17
Ug Results-based Operation for Local Bridge Construction and Road Asset
ManagementComponent 2 - Local Bridge ConstructionUnder the Financing Agreement No. 5810-VN between the International DevelopmentAssociation andthe Government of the Socialist Republic of Vietnam
4. Cash at bank - Designated AccountThis represented the designated account balance of the Component 2 - Local Bridge Construction atTransaction Head Office - State Bank of vietnam, which was converted into Vietnam Dong ("VND")as at 31 January 2018 because payments from IDA funds were recorded under the budget year(year ended 31 January 2018). Balance of this account as at 31 January 2018 was nil.
5. Cast at bank - State Treasury
This represented the bank balance at State Treasury Account of Project Management Unit 6 asat 31 January 2018 because payments from IDA funds were recorded under the budget year(year ended 31 January 2018). Such account was opened to receive funds from the World Bankfor settlements of the Component 2's activities.
6. Cash at bank - Commercial Bank Account
This represented the bank balance at Maritime Bank for temporary retention from construction andconsultant contracts under the Component 2 by Project Management Unit 8.
7. Advances to contractors/suppliers
As atUnit 31/12/2017
VND
Project Management Unit 3 129,659,949,337Project Management Unit 4 77,676,743,500Project Management Unit 6 - Bridge Component 56,810,683,724Project Management Unit 8 44,552,197,612
308,699,574,173
These represented advances to contractors to implement the Component 2's consulting servicecontracts and civil works contracts from the IDA funds as at 31 December 2017.
18
Ug Results-based Operation for Local Bridge Construction and Road Asset
ManagementComponent 2 - Local Bridge ConstructionUnder the Financing Agreement No. 5810-VN between the International Development Association andthe Government of the Socialist Republic of Vietnam
8. Other advancesAs at
Unit 31/12/2017VND
Project Management Unit 4 1,673,465,000Project Management Unit 6 - Bridge Component 2,183,700,000
3,857,165,000
These represented advances to Provincial Project Management Units from counterpart funds toimplement entrusted management contracts on the Component 2 - Local Bridge Construction ofthe Project as at 31 December 2017.
* 9. Payables to contractors
As atUnit 31/12/2017
gVND
Project Management Unit 3 8,360,969,037Project Management Unit 4 9,159,950,286Project Management Unit 6 - Bridge Component 2,693,536,255Project Management Unit 8 3,766,504,542
23,980,960,120
Payables to contractors of specialized Project Management Units included the volume ofcompleted works to be paid to contractors and temporary retentions for warranty of completedconstruction, consultant contracts which would be paid to contractors at the end of warrantyperiod from the IDA funds as at 31 January 2018 because payments from IDA funds wererecorded under the budget year (year ended 31 January 2018).
10. Other payables
This represented surplus of income over expenses from selling bidding documents by ProjectManagement Unit 6 under the Component 2 of Project. Such amounts were recorded as otherpayables under Circular No. 195/2012/TT-BTC dated 15 November 2012 issued by the Ministry ofFinance - Accounting guidance applied to Investors; and will be disbursed for bidding relatedexpenses in the next years or refunded to the State Budget after the Project is closed.
119
g Results-based Operation for Local Bridge Construction and Road AssetManagementComponent 2 - Local Bridge ConstructionUnder the Financing Agreement No. 5810-VV between the International Development Association andthe Government of the Socialist Republic of Vietnam
11. Funds received from the World BankU
Ministry of Finance - Component 2 - Local Bridge Construction (funds received to Account* 174297)
Period from 4/10/2016to 31/12/2017
Receipts under withdrawal applications Original amount Equivalent toNo. Date USD VND
UTotal funds replenished to Designated Account 24,129,745.00 541,577,109,570
(*) Details of Funds received from the World Bank by PMU accumulatively to 31 December 2017were as follows:
Accumulated toSUnit 31/12/2017
USD Equivalent toVND
Project Management Unit 3 8,112,079.00 182,076,044,708Project Management Unit 4 8,026,572.00 180,151,225,544Project Management Unit 6 - Bridge Component 4,840,795.00 108,641,414,170Project Management Unit 8 3,150,299.00 70,708,425,148
24,129,745.00 541,577,109,570
g 12. Counterpart fundsPeriod
Unit from 4/10/2016to 31/12/2017
VND
Project Management Unit 3 3,680,000,000Project Management Unit 4 3,640,000,000Project Management Unit 6 - Bridge Component 3,409,700,000Project Management Unit 8 1,430,000,000
12,159,700,000
20
g Results-based Operation for Local Bridge Construction and Road AssetManagementComponent 2 - Local Bridge ConstructionUnder the Financing Agreement No. 5810-VN between the International Deve/opmentAssociation andthe Government of the Socialist Republic of Vietnam
13. Civil worksPeriod
Unit from 4/10/2016to 31/12/2017
VND
Project Management Unit 3 37,865,700,755Project Management Unit 4 94,052,735,973Project Management Unit 6 - Bridge Component 25,820,735,422Project Management Unit 8 20,791,374,000
178,530,546,150
These represented expenditures for civil works activities incurred at functional PMUs, which weredisbursed from the World Bank's funds.
14. Consultants on construction investment, other expenses
Periodfrom 4/10/2016U Unit
to 31/12/2017VND
Project Management Unit 3 22,911,363,653Project Management Unit 4 17,581,696,357Project Management Unit 6 - Bridge Component 28,630,674,154Project Management Unit 8 8,091,788,428
77,215,522,592
These represented expenditures for consultancy services and other related expenses forconstruction activities incurred during the period, which were disbursed from the World Bank'sfunds.
U
U2
Ug Results-based Operation for Local Bridge Construction and Road Asset
ManagementComponent 2 - Local Bridge ConstructionUnder the Financing Agreement No. 5810-VN between the International Development Association andthe Government of the Socia/st Republic of Vietnam
15. Project management expensesPeriod
Unit from 4/10/2016to 31/12/2017
VND
Project Management Unit 3 3,680,000,000Project Management Unit 4 1,966,535,000Project Management Unit 6 - Bridge Component 1,226,000,000Project Management Unit 8 1,430,000,000
8,302,535,000
These represented management expenditures, which were finalized during the period anddisbursed from the counterpart funds.
16. Fund balance, end of the periodAs at
Unit 31/12/2017VND
Project Management Unit 3 121,298,980,300Project Management Unit 4 70,190,258,214Project Management Unit 6 - Bridge Component 56,373,704,594Project Management Unit 8 41,825,262,720
289,688,205,828
17. Amount withdrawn and not yet claimed
These represented advances to Project Management Units 3, 4, 6 and 8 in 2017 to implement contractsunder the Component 2 - Local Bridge Construction of the Project. These expenses will be included inthe next SOE Withdrawal Schedule.
Prepared by: Approved by:
Nguyen Tien Dat Nguyen Xuan TruongChief Accountant Director
Hanoi, 25 July 2018
U22
g Results-based Operation for Local Bridge Construction and Road AssetManagementComponent 2 - Local Bridge ConstructionUnder the Fnancing Agreement No. 5810-VN between the International Development Association andthe Government of the Socia/t Republic of VietnamAppendix I - Auditors' Responsibilities for the Audit of the Financial Statements
As part of an audit in accordance with ISAs, we exercise professional judgment and maintainprofessional skepticism throughout the audit. We also:
* Identify and assess the risks of material misstatement of the financial statements, whether due tofraud or error, design and perform audit procedures responsive to those risks, and obtain auditevidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting amaterial misstatement resulting from fraud is higher than for one resulting from error, as fraud mayinvolve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
* Obtain an understanding of internal control relevant to the audit in order to design audit proceduresthat are appropriate in the circumstances.
* Evaluate the appropriateness of accounting policies used and related disclosures made by Componentmanagement.
* Evaluate the overall presentation, structure and content of the financial statements, including thedisclosures, and whether the financial statements represent the underlying transactions and events in amanner that achieves fair presentation.
We communicate with those charged with Component Management Unit regarding, among othermatters, the planned scope and timing of the audit and significant audit findings, including anysignificant deficiencies in internal control that we identify during our audit.
We also provide those charged with Component Management Unit with a statement that we havecomplied with relevant ethical requirements regarding independence, and to communicate with them allrelationships and other matters that may reasonably be thought to bear on our independence, andwhere applicable, related safeguards.
From the matters communicated with those charged with Component Management Unit, we determinethose matters that were of most significance in the audit of the financial statements of the currentperiod and are therefore the key audit matters. We describe these matters in our auditor's reportunless law or regulation precludes public disclosure about the matter or when, in extremely rarecircumstances, we determine that a matter should not be communicated in our report because theadverse consequences of doing so would reasonably be expected to outweigh the public interestbenefits of such communication.
