2 3 JUL 2013

Audit Office of:t-Jingxia Hui Autonomous Region

of the People's Republic of China

it AuditRepon

T 'if15t~~ c 2013 J 29 %

NPAOFOREIGNINVESTMENT AUDITREPORT(2013)N0.29

Project Name: Ningxia Water Conservation Project II Financed

by the World Bank

~ *~ %: Loan No.:

8153-CN 8153-CN

Project Entity: Water Resources Department of Ningxia Hui

Autonomous Region

1?it.1t-lt: 2012

Accounting Year: 2012

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~ ~ Contents

'if? it !lrP ~ ~ ......................... ....................... ......................................... 1

I. Auditor's Opinion ................................................................ ........... ......... 3

:::_. JUt ~trt-t.&JJJt ~** 15ft1:t ............................... ........ ..... ..... ....... ......... 6

II. Financial Statements and Notes to the Financial Statements ................ 6

( - ) *"-1t3f2-~-*. ....... ...... ....................................... ....... ......... .... ....... 6

i. Balance Sheet ........ ........................................... ....................... ........... 6

( :::. ) ~ 13 :Ittlt.-*. .................... .... ....................................................... 8

ii. Summary of Sources and Uses of Funds by Project Component. .... 8

( =-) ~#XtfJ-Jt:fJLfflt*?t*-· .................. ......................................... 10

iii. Statement of Implementation of Loan Agreement.. ....................... ! 0

( ~ ) -t JfJ ]j1{{? ** ......................................................................... 11

iv. Special Account Statement. ............................................................ 11

(E.) ..rot 4J-4l-*.~t1i ......................................................................... 13

v. Notes to the Financial Statements ................................................... 15

:=_' $'it~~ tfJ f~ ~&JttJ. ................................... ................................ 17

Ill. Audit Findings and Recommendations ............................................... 22

~ ffJ '$'it J W:Jff.-1Rfi~it T J..1i Jk)( ~-=-M :rJi t?J 2012 ~ 12 fJ 31

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~ffi~~,--&~~M~~*~~~-*~W~~~OO~~* ·~·~*~~~*~§~-~~~~~~~,~~&~1~~~­T ~:;t;d()lj~=-~~ § 2012 1¥- 12 JJ 31 E ~Jilt~~~&~~~ s ~

1¥-~~~~~~. ~m~ff~~m•P~~~~.

~~ 2012 1¥- 12 JJ 31 s, ~ m ~Ac~~~*· ***~~%z~,#~~~•*~*~~~m~~~: ~~~

*&~~~*~~~·#~~~~-&~~.

7 J. lE1 ~ t$J ~ lR 'ff1 it JT 2o13 1f. 6 JJ 21 a

~m tt: ~ oo T Y-w ~ § jfi IR 4R; 11 w ifr $ w #3-~ 3 92 % lfi~jfj(ti~ : 750001

It 1! : 86-951-5043073

'ft .. : 86-951-5044183

'

I. Auditor's Opinion Auditor's Opinion

To Water Resources Department of Ningxia Hui Autonomous Region

We have audited the special purpose financial statements (from page 6 to page 16) of Ningxia Water Conservation project II financed by the World Bank, which comprise the Balance Sheet as of December 31, 2012, the Summary of Sources and Uses of Funds by Project Component, the Statement of Implementation of Loan Agreement and the Special Account Statement for the year then ended, and Notes to the Financial Statements.

Project Entity and Ningxia Finance Department's Responsibility for the Financial Statements

The preparation of the Balance Sheet, the Summary of Sources and Uses of Funds by Project Component and the Statement of Implementation of Loan Agreement is the responsibility of your entity, while the preparation of the Special Account Statement is the responsibility of Ningxia Finance Department, which includes: i. Preparing and fair presenting the accompanying financial statements in accordance with Chinese accounting standards and system, and the requirements of the project loan agreement; ii. Designing, implementing and maintaining necessary internal control to ensure that the financial statements are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Government Auditing Standards of the People's Republic of China and International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fmancial statements are free from material misstatement. An audit involves perfonning procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the fmancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entities' preparation and fair

presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is appropriate and sufficient to provide a basis for our audit opinion.

Opinion

ln our opinion, the financial statements identified in the first paragraph present fairly, in all material respects, financial position of Ningxia Water Conservation Project II Financed by the World Bank as of December 31, 2012, its financial receipts and disbursements, the project implementation and the receipts and disbursements of the special account for the year then ended in accordance with Chinese accounting standards and system, and the requirements of the project loan agreement.

Other Matter

By the end of December 31, 2012, The Project was not withdrawn from the World Banlc The audit report consists of the Auditor's Opinion and two more parts hereinafter: Financial Statements and Notes to the Financial Statements, Audit Findings and Recommendations.

-Audit Office_ of Ningxia Hui Autonomous Region of the People's Republic of China #

June . .27, 2013

Address: No. 392 Xinhua Xijie Road, Yinchuan City, Ningxia, P.R. China Postcode: 750001 Tel. : 86-951-5043073 Fax: 86-951-5044183

The English translation is for the convenience of report users; Please take the Chinese audit report as the only official version.

_,.

II. Financial Statements and Notes to the Financial Statements

(-)~*J¥-•*-i. Balance Sheet

~*~{jf* BALANCE SHEET

2012 ~ 12 JJ 31 El (As of December 31, 2012)

~0~~: ~~~fi~~~X~~~~~M~ID Project Name: N ingxja Water Conservation project II fmanced by the World Bank

~~~ft: T~~~ff ~$~ft: A~$~ Prepared by: Water Resources Department of Ningxia Hui Autonomous Region Currency Unit: R.MB Yuan

1t ~ rS Ill ff~ MiJJr£ JIJI~«l! 1t ~ * 11 tf~ RlPJ«l RJif{«!( Line Line

Application or Fund No.

Beginning Balance Endin& Balance Sourcea or Fund No.

Beginning Balance Endina Balance

-, 1lH.tlil~l -. ll1Hl¥t'll' it

T ocal Project Expcndirurea I 80,654.590.94 T oeal Project 28 - 79,110,278.44

Appropriation Funds

t.~Hf!IOt!F -· 1l!HU.I:i11fJII-*1}lSI Fixed Asset! TransfCTTed

2 - Project CapitalllDd C&pital 29 -Surplus

2. tH~t:R~U:tll lt<P:JIIIjj: Consll'\lction Expeodirurcs 3 - Including: Gnnts 30 - -

to be Disposed

3.MiillUi 4 - =· lllHfJ:fht 31 471,412.50

ln\eslmc:IIIS Tnnsfemd-out - TOtal Project Loa -

4.(Ef!Itz t.1lfHill!~

Coosll'llction in Progress 5 80,654,590.94 T oeal Project 32 - 471,412.50

Investment Loan

=· l!ii&1:J"ljl.tr£-tlti.'Hii'f6: 6 - {I) lll?Hit.tl: 33 471,412.50 lnvcstmcntl.oiD Receivable FQI'eign loin -

Jt•l':fO!~~f' 4\!tttttff)UI: ltcf>:III~Jfl!HIJ~ IJicluding: WQI'ld Bank 7 -lncludinc: IDA

34 - -ln\'ealmcllt I-Oili Recti~able

=-· llf:tln.iilftf: ~tr.;;~~Jf£11 Appropriatioo ofln\'cstmcnt 8 - - ft 35 - 471,412.50 Loan IBRD

Jt rt> :ll f1 tit tTIIUl: tt~*~~~ lncludina .Appropriation of 9 - - Technical 36 - -WQI'ld Bank ln•estmcnt Loan Cooperation

P.Y.au 10 - .XftltJi 37 Equipmeol <h- Financing

-

Jtcf>:tH!J!ltU~l'l~ {2) lili"HI'tD: Including: Equipment U!sses II - - 38 -

in Suspense Domestic Loan

Ji, ~iliS1fi<1hl 12 - 2. Jtief&J: 39 T oul Cash IIDd Bank Otberl..Aleo -

I.I!Hi'{f~ 21!. l:fJtiA.li.l!ik

Cash in Bank 13 - APPfopriaUon of 40 - -

ln~cstment Loan

){..P:-tt m~f'.Yt: Jt.P:ttA.t!ttrt:f.l

locludins: Special Account 14 - lncludina: World Bank 41 -

Loan

2. Jllt IS - .li. fe~iJ!Mii: 42

Cash on Hand Bond Fund -

Jfi t;t (To be continued )

... limlH -tw "' t>.. ffH:f &f.i~#'ftit 16 . ConSirucuon Expenditures 43 . . Total Prepaid and Receivable

to be Offset

Jt<f> !;Y.i&tU.liPff:;fJJ.Q. t. fif:fl\f.-il 44 . 1.072,9( lncludmg: World Bank Loan 17 . .

Total Payable lntcl'e)t Receivable

~i&tltti~M\*\t~ Jt<P:liH tltti~'rtl:f:IJ.tl. World Bank Loan 18 . Including. World Bank 45 . . Commitment Fcc

Loan Interest Payable ReceiVable

cxf-tll! n ~JP;~ ~t r.t 8: !& 11ttr1iU\:iUz MIH't World Bank Loan

46 . World Bank Loan Service- 19 . Commitment Fee

Fcc Rcce1vable Payable

~~ mtt 1i 1;'Ul: \!! :ifl r'j m -t.. 1'iift~H~ ~ 47 -20 . - World Bank Loan Matketable Securities

Semce Fcc Payable

J\, w~trti"'ftrr )\. :t-~l:il'i.~ 48 -21 - - Other Payablcs Total Filled Assets

ltSJir!l!f'"flift JL, .tt1Hl.A \1l ii 49 . 22 - - ~ropriauon of Fund Fixed A~sets, Cost

~ WHI~ II:l f • \'1./&.ll!t.A so -Less: Accumulated 2J - - Retained Eammgs Oe_j>_retiation

"~~i"'~m 24 . -Ftxed Assets, Net

W~Wfi"'lrVP 2S - -Fixed Assets Pending Disposal

fHl:JJ ~ ~ JfF M !!\ 26 - . Fixed Assets Losses in Suspense

~ ~ .!r Jllfr rr 80,654,590.94 -~*lli'fri.t 51 - 80,654,59 Total Application of Fund

27 TOtal Sources of Fund

7

(::.)J;Jil3:ili:lt* ii. Summary of Sources and Uses of Funds by Project Component

J3fi fJ lit~*(-) SUMMARY OF SOURCES AND USES OF FUNDS

BY PROJECT COMPONENT I ;f.MtO:. 2012 if 12 }] 31 s

(For the period ended December 31, 20 12 )

~~~~: ~~~rr~~?~~~~~~~~~ Project Name: Ningxia Water Conservation project II financed by the World Bank •••tt: ~·~~ff -~·ft: A~~~ Prepared by: Water Resources Department of Ningxia Hui Autonomous Region Currency Unit RMB Yuan

*M .lit CUJTCnt Period Cumulative

...$:Witt.tJJ. ;.f;:Mtl~lit ~.IU!J'il/iltlt ~f!l.€a.it ~Jg

.lit ;:clita J&tt~illltlt Current Current Period Current Period Cumulative Cumulative%

Period Budget Actual %Completed LifeofPAD Actual Completed

5rt~*~1l-it 20 I, 183,000.00 79,581,690.94

Total SouTces of Funds 39.56% 410,868,000.00 79,581,690.94 19.37%

-' ~ ~:;?ziU11J.R11fl: 88,695,000.00 471,412.50 0.53% 204,600,000.00 471,412.50 0.23°/e

Intem31ional Financina

1. l.ilij;~~Jf~tur 88,695,000.00 471,412.50 0.53°/e 204,600,000.00 471,412.50 0.23·~

IBRD

- ,!ft.:~-&: 112,488,000.00 79,110,278.44

Countcrpan Financing 70.33% 206,268,000.00 79,110,278.44 38.35%

~~.iM)-frtt 201,183,000.00 80,654,590.94 40.09% 410,868,000.00 80,654,590.94 19.63%

Total Application of Funds

t.7l<.~J T.lll.fll'W-* m• Water Works and Water Savma 157,075,000.00 69,920,010.25 44.51% 255,523,300.00 69,920,0 I 0.25 27.36%

Facthties

H~llk ~ *!: JUt::t ll¥ JB ~ Agricultural Measures and Suppon 16.843,000.00 8,003,029.19 41.55% 67,415.100.00 8,008,029 19 11.88~ ..

Services

3. 'f P.IH:t .&t.f!Jtn ~ ~.fll \.fa.naaernent Measures and 8,31 0,000.00 . . 12,499,300.00 . .

Institutional DeveiC)pmcnt

4.1Di l'l 'lfJI! l=j~Dt Project Management and 16,215,000.00 2,255,139.00 13 91% 18,003,200.00 2,2S.S, 139.00 12.53%

Implementation Support

S.1tfti 2,740,000.00 471,412.50 Other

17.2~'0 57,427,100.00 471,412.50 0.82%

z . .sr -1,072,900.00 -1,072,900.00 . . . . Difference

I . .ti&&;,:~«; - . . . . . Chanae in Receivables

2. ~{;f~~«: -I ,072,900.00 -1,072,900.00 . . . .

Change in Payables

3. 1.1Hfi ~:Q~it . . . . . Change in Cash and Bank

4.lt'B . . . . . . Other

II

~ 13 *1t*(.::.) SUMMARY OF SOURCES AND USES OF FUNDS

BY PROJECT COMPONENT IT -*Mit~ 2012 ~ 12 }] 31 B

(For the period ended December 31,2012)

~§~~: ~~-fi~~T~~*~~~M~§ Project Name: Ningxia Water Conservation project ll fmanced by the World Bank

ii4llfl.1ft: 9 ~#.ltl ff ~ iP -'¥!-19:.: A~ iP .7t Prepared by: Water Resources Department of Ningxia Hui Autonomous Region Currency Unit RMB Yuan

J1li8~~ llliffi:X!±I Project Component Project Expenditure

J; it :X lf1 e~N-ll.i"' ffl~iftllliEl:X!±I Cumulalive Amount Assets Transferred tE~Ifl Construction ~!±IN lit

Investments flil~llF it MilT" x~lli"" iAilUtF Work in Progress Expenditures to be

Transferred-out Fixed Asset Current Asset Intangible Asset Deferred Asset Disposed

I. *~liii~-;;l!(ntliti 69,920,0 I 0.25 69,920,010.25 - - - - -

Water Works and Water Saving Facilities

2. ~llfitl!(ffH~&:X~IN9} 8,008,029.19 8,008,029.19 - - - - -

Agricultural Measures and Support Services

3. 1UUtt!ii~t11.1'lil~~ - - - - - - -~anagement Measures and Institutional Development

4.llli El 'l!JIJ!~;1:1Ji 2,255,139.00 2,255,139.00 - - - - -

Project Management and Implementation Support

s. Jtit!! 471,412.50 471.412.50

Other - - - - -

'frit-80,654,590.94 - - - - 80,654,590.94 -

Total

9

-

I -

-

-

-

< =-) ~-~;t~Atit~* iii. Statement of Implementation of Loan Agreement

~~t91'Jt&rr·lt~* STATEMENT OF IMPLEMENTATION OF LOAN AGREEMENT

*~~~ 2012 ~ 12 JJ 31 a (For the period ended December 31, 2012 )

~~~~: ~~-~~T~~~~~~M~~ Project Name: Ningxia Water Conse.rvation project IT ftnanced by the World Bank

!A:Ja.lf!-ft: T J.~.t1Jff Prepared by: Water Resources Department of Ningxia Hui Autonomous Region

... ~~-~· *if:lldl'l ~ ~; loan AmoW~t Cum:nt-period Withdrawals

Category ~:it ,.:it tfi'ftA~ifi

USD USD RMB

t. :rw 2 2, 8 55,000.00 .

Civil Works

2. 1lr W(wuAfHm~~ > 5,370.000.00 .

Goods(olher than for WUAs Gr.111t1)

3. ~ iiiiR* ..tJj! Vl 1.470,000.00 .

Con:;uhing Sel'\icc 311d TrU!ing

4. ti tVH Jt( IM< 2.30,000.00 .

WUA Grants

5. *=ti :et 75,000.00 75,000.00 471,412.50

Front-end fee

6 ~Jfl-1'' . . Spcctal ActOW~t

.

.

-

.

.

~it 30.000.000.00 75,000.00 471,412.50

Tom!

10

)\' $ -4l1:\2:: ~5t/ A ~ f!5 .:7G Cwrency Unit: USD/ RMB Yuan

arrl!l!kfi Cumulative Withdrawab.

~ji; tfiitAI'!ili USD RMB

.

.

-

-

75,000.00 471.412.50

.

75,000.00 471.412.50

.

.

.

-

-

(!m){-JfJ~?~* iv. Special Account Statement

~}f]*?** SPECIAL ACCOUNT STATEMENT

-*Mil.¥ 2012 it- 12 JJ 31 E

(For the period ended December 31, 2012)

lJHJ.t ~: i!!:Jf-1!-IT~~ 9 ~ 1t7J<.)Jj~.::.M~ 13 Project Name: Ningxia Water Conservation

Project II Financed by the

World Bank

*Pilfi.t~: ~OOX~ffT~~fi Depository Bank: Ningxia branch, China

Industrial and Commercial bank

~j:_-4'}: 8153-CN

Loan No. 8153-CN

f;lijlilf!-15L: 9 ~!§~ ~ ~ IK!l!ti.tff Prepared by: The Finance Department of Ningxia

Hui Autonomous Region

A$f.h -*AA-tt m~ .Nlt~ m ~ Part A-Account Activity for the Current Period

J!lHlJ~iJi

Beginning Balance

.II Jxi,

Add:

* Rltllff @l~~.!ij. $1

Total Amount Deposned this Period by World Bank

* JVI;f~J.@!. ifJl:.\~fli! <:(f.\ 1;· ffl_.l' flU#>

T01al Interest Earned this Period ifDeposiled in Special Account

*All'!' 'IHU: til !laiE $11

Total Amount Refunded thi.~ Period to Cover Ineligible Expenditures

~j>,

Deduct:

*.l0!1iit~~

Total Amount Withdrawn this Period

*~*~M~~M~~~m~~~tll Total Service Charges this Period if not Included in Above Amount Wilhdrawn

M*~ii

Ending Balance

( Fo ~To be continued)

~%: 2902028029914011 165

Account No. : 2902028029914011165

~rp~~: ~.Jt Currency: USD

~ili!

Amount

0.00

.

-

-

-

-

-

-

0.00

Bffi!~, -t;·ffl~f';,urw j}.tji

Pan B-Account Reconciliation Amount

I. t!!:rr rrzx~~.tii~

Amount Advanced by World Bank 0.00

~!,l>.

Deduct:

2. ttt:V~-mrr!9J&&.I!l!Wi

Total Amount Recovered by World Bank -3. ;;j>;JtllM*~Ifl~f'ilrl.X#ii:?IHYi

Outstanding Amount Advanced to the Special Accot:nt at the End of this Period -

4. ~.lfl~f'WJ-*~!Wi

Ending Balance of Special Account 0.00

it1Jo: Add: -

5. tn?:-*W:Hill-* e. 1¥ m'1UH!l i\'M~ @1~1U~ Amount Claimed but not yet Credited at the End of this Period -

lf!'4'f~i} ~~~

Application Nu. Amuunt -

- - -

- - -6. f£:?~)t>WJWJ;:l{ e:t 1tffi.~)( !¥ii!HQ~~~~

Amount Withdrawn but not yet Claimed at the End of this Period -7. llll9Ht~i-t·:ttll <.141-*ittts;JUM~rt>>

Cumulative Service Charges (If not Included in Item 5 or 6) -i\l&:

Deduct: -8. ~J.e.&&A <7f.A't;·Jf.l~.f'ffil1t)

Interest Earned (If Included in Special Account) -9. ;;ji:JIJJJ!Jl.*~ffl~f'ttl.X.fi!ltlftl!

Total Advance to the Special Account Accounted for a1 the End of this Period 0.00

Llfli § ~~ 11t~4Rfi~~T ~ lt#)(jgt=:.jtlj~ l§ ~~% }t1 8153-CN, ~ :(f~:QiJ(

~\§~~~ , ~4*~m#~~,~~~l§g*~#~r*.~ \§ ~~ 8 ~Jji 13-!- ( [g_) *' 1 -t:ttJ!::j:~~~foj' .i.:JJ:Yi 13 ~~-gtt#{~.I~*'lt #~~,*~:P~m~~~M•*'*~~~*'~~~~,~l§*~~~ ~~M. ~ l§ tdJ.t;!( -T 2012 ~ 8 JJ 13 8 ~iT, 2012 ~ 11 JJ 13 8 ~~,

~it 2017 ~ 6 }] 30 E ]tr =*I~ 0 Jji 13 it~~ I~'~* }t1 A~$ 410,868,000.00

it ' ;ft. tp : -t1t !# iR fi ~ #~ I~' $i 7J 30,000,000.00 ~ it ' 4'Jf ~A ~ FP 204,600,000.00 it.

2. 9Jt*jl*~~Jfe:OO *M.j~i-*:~-~fe:OO~~-TI~~ff~§~, 8 -t*C4, g)~

§~, I -t*~·~·~foj~§~~,OOt*jl*~T~M~ff~~~?jl

*· 3 . .i.t:4?-it~Jt

3.1 *~ 13 M~**~Jffi.OOt~-$ «i!t~~fi~ffiXJ:Yi 13 ~it~-~*» c N~~~* c2ooo J 13 %) ~~;Jt~~J.

3.3 *l:Yi 13 ~it~•~V- "-lX:YJt~~~J"1f7JiE~MtP!~, ?!tJfJ1t~~~ic l**iEJ*, IV-A~$ 7J ill*-* 1ft$.

3.4 ~Jffi tf I!JA~llfi 201 2 ~ 12 }] 31 B 5[$, &p USD1=A~ $

6.2855 it.

4. 1&*~4- § 1-Jt afj

4.1 ~§.:Rill

2012 if~ 13 .:R ill A ~ fi5 80,654,590.94 JG , J- it j:_ ill A ~ fi5 80,654,590.94 jc, ~ l~'ft*"it~ljef-J 19.63%.

4.2 ~ § ~#X 2012 if 12 JJ 31 s ~*Yil.J A~ FP 79,110,278.44 Jt, ~ ~ 1~ !K , -!H rK)

~~~U1ft.~f3~**"1t , ~~ § it~1Jrf~:t:*~'~'~A~ Fj5 206,268,000.00 Jt Et-J 38.35%.

4.3 ~ § 1tt#X 2012 if 12JJ 31 EJ~~J:JA.~$ 471,412.50 Jt, Jttf : l!l~~~~ff

~4l1f~#,t$Yi~ 75,ooo.oo ~it, tJf% A~$ 471 ,412.50 Jt.

4.4 Ell 1t~ 2o12 if 12 JJ 31 a ~$iJ.JA.~ ;:p 1,o12,9oo.oo Jt, i.~~m1t~I.lf!-

1ft. if-J I.{£~ 0

5 .{-JfJg!!Cf'1~JfJ'tt~ -*~ 13 -tJflgitC/'~-T±tf l!JI.j})j~fit~7tff, g!!C%7.1

29020280299140 11165 , f15 ~ J.J !k Jt. ~ :f: 20 12 if. 12 JJ 31 a , ~ 13 -t m g!!Cp ~Act&JlJ~ ~~' if-*~~~ 0.00 }kjc.

14

v. Notes to the Financial Statements

Notes to the Financial Statements

1. Project Overview

The Loan No. of Ningxia Water Conservation Project TI financed by the World Bank is 8153-CN. It aims to improve agriculture water management and to increase agricultural water productivity in the Project Areas. The Project involves 8 Project Counties and 1 Agricultural Reclamation Bureau. The main project activities include water works and water saving facilities, agricultural measures and support services, management measures and institutional Development, project management and implementation support. The Project Agreement was signed on August 13, 2012 and came into effect on November 13, 2012. The account of the project will be closed before June 30, 2017. The total investment plan of the project was RMB41 0,868,000yuan, among which the total World Bank loan amount was USD30,000,000.00, equivalent to RMB204,600,000.00 yuan.

2. Consolidation Scope of the Financial Statements

Consolidation scope of the financial statements covers the financial statements of the project office of Ningxia Hui Autonomous Region, 8 project offices of county level and 1 project office of Agricultural Reclamation Bureau, as well as the Special Account set in the Ningxia Finance Department.

3. Accounting Policies

3.1 The Financial Statements of the project were prepared according to the requirements of Accounting Methods for the World Bank Financed Project

(Caijizi[2000]No.J3 ) .

3.2 In accounting practice, the Gregorian calendar year is adopted as the fiscal year from January 1 to December 31 .

3.3 The accrual basis and the debit/credit double entry bookkeeping method

I C

are adopted. RMB is used as the recording currency of bookkeeping.

3.4 The exchange rate adopted in the financial statements was the exchange rate on December 31, 2012 of the People's Bank of China, which is USDl= RMB6.2855 yuan.

4. Explanation of Subjects

4.1 Total Project expenditures

The project expenditure in 2012 was RMB80,654,590.94 yuan, and the cumulative expenditures were RMB80,654,590.94 yuan, which accounted for 19.63% of the total investment plan.

4.2 Project Appropriation Funds

The balance on December 31, 2012 was RMB79,110,278.44 yuan, which was the counterpart funds allocated by all levels including the province, the city and the county. The total planned counterpart funds of this project were RMB206,268,000.00 yuan. By the end of 2012, RMB79,110,278.44 yuan of the counterpart funds had been allocated, which accounted for 38.35% of the plan.

4.3 Project Loan

The balance on December 31, 2012 was RMB471 ,4 12.50 yuan, including the ffiRD loan USD75,000.00, equivalent to RMB 471,412.50 yuan.

4.4 Payable

The balance on December 31, 2012 was RMB1,072,900.00 yuan, mainly payable to the contractors.

5. Special Account

The Special Account of this project is set in Ningxia Branch, China Industrial and Commercial Bank, with the account number of 2902028029914011165, and USD as currency Unit. By the end of 2012, the ending balance was USDO.OO.