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THE SECOND NORTHERN MOUNTAINS POVERTYREDUCTION PROJECT (ADDITIONAL FINANCING)

Credit Number 5596 - VNDien Bien Province

AUDITED FINANCIAL STATEMENTSFor the year ended 31 December 2017

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1The Second Northern Mountains Poverty Reduction Project - Additional FinancingCredit Number 5596 - VNDien Bien Province

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CONTENTS Page

I PART I INDEPENDENT AUDITORS' REPORT ONTHE FINANCIAL STATEMENTS

Report of the Province Project Management Unit 3

Independent Auditors' Report on the Financial statements 4-5

Audited Financial statements

Statement of Receipt, Disbursement and Fund balance 6

Statement of Designated account 7

Statement of Withdrawals 8

Notes to the Financial statements 9 -15

Reconciliation of Funds 16

PART II INDEPENDENT AUDITORS' REPORT ON 17 -18THE INTERNAL CONTROL SYSTEM

PART III INDEPENDENT AUDITORS' REPORT ON 19-20THE COMPLIANCE

PART IV MANAGEMENT LETTER 21 -24

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1The Second Northern Mountains Poverty Reduction Project - Additional FinancingCredit Number 5596 - VNDien Bien Province

REPORT OF THE PROVINCE PROJECT MANAGEMENT UNIT

The Project Management Unit of the Second Poverty Reduction Project - Dien Bien Province ("theProvincial Project Management Unit") presents this report and the Financial Statements of the SecondNorthern Mountains Poverty Reduction Project ("the Project") - Additional Financing implemented inDien Bien province for the year ended 31 December 2017.

The Project

The Project is implemented under the Credit Number 4698 - VN between the Socialist Republic ofVietnam and the International Development Association ("IDA"), which was signed in May 2010,brought into effect in August 2010 and completed in August 2015. On 09 July 2015, the AdditionalFinancing of USD 150 million, the Credit Number 5596-VN ("the Agreement"), was signed to financethe costs associated with the (a) continuation and expansion of the Project's support to povertyreduction effort in the existing six project provinces of the poorest region of Vietnam's Northwest; (b)increasing the Project poverty reduction impacts upon additional districts and communes; (c) scaling-up and deepening of the participatory local development planning (known as SEDP) and contribute toinstitutionalizing this approach in the Vietnamese Government's national poverty reduction programs;and (d) enhancement of sustainable livelihoods through further common interest group (CIG)development, and the strengthening of partnerships between farmer groups and agro- businesses.

The Provincial Project Management Unit

Members of the Provincial Project Management Unit in the year and to the reporting date are:

Mr. Vu Lenh Nghi DirectorMr. Ta Xuan Truong Deputy DirectorMs. Nguyen Thi Hai Chief Accountant

I Auditors

The auditors of AASC Limited have taken the audit of financial statements of the Project.

Responsibilities of the Provincial Project Management Unit

The Provincial Project Management Unit is responsible for preparing the project financial statements,including Statement of Receipt, Disbursement and Fund balance, Statement of Designated Accountand Statement of Withdrawals, which comply with the accounting policies described in the attachedNotes to the Financial Statements. The Provincial Project Management Unit assures that theaccounting policies are appropriately selected and consistently applied.

The Provincial Project Management Unit assures that the accounting records were fully maintained toprepare the financial statements in accordance with the applied accounting policies and to disclose,with reasonable accuracy at any time, the financial position of the Project.

The Provincial Project Management Unit is also responsible for maintaining an effective internalcontrol as management determines necessary to enable the preparation of financial statements thatare free from material misstatement, whether due to fraud or error, and comply with relevant laws,regulations and other provisions of the funding credit that could have a direct and material financialeffect on the Project financial statements.

On behalf of the Provincial Project Management Unit

Ta Xuan TruongDeputy Director

Dien Bien, 25 June 2018

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,aascNo.: 250618.007/BCTC.FIS2

INDEPENDENT AUDITORS' REPORT ON THE FINANCIAL STATEMENTS

To: The Project Management Unit of the Second Poverty Reduction Project- Dien Bien Province

Opinion

We have audited the accompanying financial statements of the Second Northern Mountains

Poverty Reduction Project ("the Project") - Additional Financing implemented in Dien Bien which

comprise Statement of Receipt, Disbursement and Fund balance, Statement of Designated

account, Statement of Withdrawals for the year ended 31 December 2017, and Notes to the

Financial Statements, including a summary of significant accounting policies.

I In our opinion:

The accompanying financial statements give a true and fair view of the financial position of the

Project, including the balance of the Designated Account as at 31 December 2017, funds

received and disbursements paid, movements of the Designated Account for the year then ended

in accordance with the basis of the principal accounting policies described in the Notes to the

Financial Statements and the provisions of the Credit Number 5596 - VN dated 09 July 2015.

In addition, with respect to Statements of Expenditure, adequate supporting documents have

been fully maintained to support to the replenishment requests submitted to the International

Development Association. The expenditures are eligible and in right purposes of the Credit

Number 5596-VN dated 09 July 2015.

Basis of Opinion

We conducted our audit in accordance with the International Standards on Auditing ("ISAs"). Our

responsibilities under those standards are further described in the Auditors' Responsibilities for the

Audit of the Financial Statements section of our report. We are independent of the Provincial

1 Project Management Unit in accordance with the International Ethics Standards Board for

Accountants' Code of Ethics for Professional Accountants ("IESBA Code"), and we have fulfilled

our other ethical responsibilities in accordance with the IESBA Code. We believe that the audit

evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Responsibilities of Management for the Financial Statements

The Provincial Project Management Unit is responsible for the preparation of the financial

statements in accordance with the principal accounting policies described in Notes to the Financial

Statements, and for such internal control as management determines is necessary to enable the

preparation of financial statements that are free from material misstatement, whether due to fraud

or error.

In preparing the financial statements, the provincial project management unit is responsible for

assessing the Project's ability to continue as a going concern, disclosing, as applicable, matters

relating to going concern and using the going concern basis of accounting unless management

e;ther intends to cease operations, or has no realistic alternative but to do so.

Auditor's Responsibilities for tne Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a

whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's

report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a

guarantee that an audit conducted in accordance with ISAs will always detect a material

misstatement when it exists. Misstatements can arise from fraud or error and are considered

material if, individually or in the aggregate, they could reasonably be expected to influence the

economic decisions of users taken on the basis of these financial statements.

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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 dueto fraud or error, design and perform audit procedures responsive to those risks, and obtainaudit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk ofnot detecting a material misstatement resulting from fraud is higher than for one resulting fromerror, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or theoverride of internal control.

Obtain an understanding of internal control relevant to the audit in order to design auditprocedures that are appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Project's internal control.

Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by the management.

Conclude on the appropriateness of management's use of the going concern basis ofaccounting and, based on the audit evidence obtained, whether a material uncertainty existsrelated to events or conditions that may cast significant doubt on the Project's ability tocontinue as a going concern. If we conclude that a material uncertainty exists, we are requiredto draw attention in our auditors' report to the related disclosures financial statements or, ifsuch disclosures are inadequate, to modify our opinion. Our conclusions are based on the auditevidence obtained up to the date of our auditors' report. However, future events or conditionsmay cause the Project to cease to continue as a going concern.

I Evaluate the overall presentation, structure and content of the financial statements, includingthe disclosures, and whether the financial statements represent the underlying transactions andI events in a manner that achieves fair presentation.

We communicate the Provincial Project Management Unit regarding, among other matters, theplanned scope and timing of the audit and significant audit findings, including any significantdeficiencies in internal control that we identify during our audit.

AASC Limited

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Do Manh Cuong Nguyen Pham HungDeputy General Director Auditor in-chargeCPA Registered No.: CPA Registered No.:0744-2018-002-1 2893-2015-002-1

Hanoi, 25 June 2018

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-- Mmm--mmmmm -mmmm--- mm

The Second Northern Mountains Poverty Reduction Project - Additional FinancingCredit Number 5596 - VN Financial statementsDien Bien province Year ended 31 December 2017

STATEMENT OF RECEIPT, DISBURSEMENT AND FUND BALANCEFor the year ended 31/12/2017

Accumulatedto 31/12/2016 Accumulated

Notes (Represented) Year 2017 to 31/12/2017VND VND VND

1. Receipt1 Receipts from the Intemational Development Association 3 66,509,667,450 88,510,387,200 155,020,054,6502 Receipts from the Vietnamese Government 4 4,517,000,000 10,606,489,804 15,123,489,8043 Other receipts 5 1,031,442,867 8,053,791,212 9,085,234,079

72,058,110,317 107,170,668,216 179,228,778,533

II. Disbursement 61 District economic development 10,287,717,200 36,674,553,040 46,962,270,2402 Commune development budget 22,417,181,109 49,874,627,031 72,291,808,1403 Capacity building and Communication 6,773,703,900 2,701,572,300 9,475,276,2004 Project management 10,385,151,347 15,920,685,929 26,305,837,276

49,863,753,556 105,171,438,300 155,035,191,856

Ill. Surplus 22,194,356,761 1,999,229,916 24,193,586,677

Foreign exchange differences 644,654,993 88,833,643 733,488,636

IV. Fund balance at the end of the year/period 22,839,011,754 24,927,075,313

Presented by:Cash on hand - 7,900,000Cash at bank, treasury 7 22,839,011,754 24,919,175,313

22,839,011,754 24,927,075,313

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IThe Second Northern Mountains Poverty Reduction Project -Additional FinancingCredit Number 5596 - VN Financial statementsDien Bien Province Year ended 31 December 2017

STATEMENT OF DESIGNATED ACCOUNT

Period: from 01/01/2017 to 31/12/2017Holder: The Project Management Unit of the Second Poverty Reduction Project - Dien Bien

ProvinceAccount No.: 8900201003253Bank: Viet Nam Bank for Agriculture and Rural Development - Dien Bien BranchAddress: No. 888, Group 12, Muong Thanh ward, Dien Bien city, Dien Bien province

PART A: ACTIVITES Notes USD USD

Opening balance 983,609.86

Add: Total amounts deposited by the IDA 3,936,655.01Deduct: Total amounts withdrawn (3,885,233.85)

Closing balance 1,035,031.02

PART B: RECONCILIATION

1. Amount advanced by the IDA 1,486,550.052. Add: Total amounts added by the IDA 2,300,000.002. Deduct: Amount recovered by the IDA (811,340.83)3. Present outstanding amount advanced to 2,975,209.22

4. Closing balance 1,035,031.025. Add:Amounts withdrawn but not yet claimed (1) 1,940,163.20Oversea bank charges 15.00 -

1,940,178.20

6. Total advances accounted for 2,975,209.22

(1) Including:

USD

Grants and Innovation grants 1,463,811.45Works, Goods, Consultants' serAves, Training and 46317Incremental Operating Costs

1,940,163.20

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The Second Northern Mountains Poverty Reduction Project - Additional FinancingCredit Number 5596 - VN Financial statementsDien Bien Province Year ended 31 December 2017

STATEMENT OF WITHDRAWALSFor the year ended 31 December 2017

Withdrawal application CategoriesWorks, Goods,

No. Date Advance Grants and Innovations Grants Consultants' servives, Training Totaland Incremental Operating Costs

USD EquivalenttoVND USD EquivalenttoVND USD EquivalenttoVND USD Equivalent to VND

Designated account

04/DB/NMPRP2 20/01/2017 - 254,237.14 5,699,147,003 557,103.69 12,449,229,357 811,340.83 18,148,376,36005/DB/NMPRP2 21/04/2017 2,300,000.00 51,612,000,000 - - - - 2,300,000.00 51,612,000,00006/DB/NMPRP2 31/05/2017 - 366,617.35 8,256,591,000 1,270,037.66 28,580,952,200 1,636,655.01 36,837,543,200

2,300,000.00 51,612,000,000 620,854.49 13,955,738,003 1,827,141.35 41,030,181,557 4,747,995.84 106,597,919,560

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1The Second Northern Mountains Poverty Reduction Project- Additional FinancingCredit Number 5596 - VN Financial statementsDien Bien Province Year ended 31 December 2017

NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2017

1. Background

The Socialist Republic of Vietnam has received a credit from the International DevelopmentAssociation ("IDA") in the amount of USD 150 million toward the cost of the Second NorthernMountains Poverty Reduction Project ("the Project") under the Credit Number 4698 - VN, whichwas signed in May 2010, brought into effect in August 2010 and completed in August 2015.

On 09 July 2015, the Additional Financing ("the Credit Number 5596-VN" or "the Agreement") ofUSD 150 million was signed to finance the costs associated with the (a) continuation andexpansion of the Project's support to poverty reduction efforts in the existing six project provincesof the poorest region of Vietnam's Northwest; (b) increasing the Project poverty reduction impactsupon additional districts and communes; (c) scaling-up and deepening of the participatory localdevelopment planning (known as SEDP) and contribute to institutionalizing this approach in theVietnamese Government's national poverty reduction programs; and (d) enhancement ofsustainable livelihoods through further common interest group (CIG) development, and thestrengthening of partnerships between farmer groups and agro- businesses. The Agreementofficially came into operation since 07/10/2015 and is expected to close on 30/06/2018.

The objective of the Project is to enhance the living standards of the Project's beneficiaries byimproving: (i) their access to productive infrastructure; (ii) the productive and institutionalcapacities of local governments and communities; (iii) Commune integrated investment planning;(iv) Market linkages and business innovations.

The Project includes the following parts:

Part 1: District Economic Development

Provision of support for the implementation of District Socio-Economic Development Plansfocusing on productive infrastructure for local employment and income generation, anddiversification of the livelihoods of the rural poor; including:

> Provision of support for financing small and medium size investment projects including, but notlimited to, intra-commune roads, small-scale irrigation schemes, drinking water supplies andrural markets; andProvision of support to improve supply side and market institutions for the poor including: (i)carrying out of research and analytical studies to identify market opportunities and createenabling environment; (ii) establishing partnerships with banks, nongovernmentalorganizations, private sector for providing dedicated linkage support to rural producers andmicroenterprises; and (iii) provision of Innovation Grants to promote innovative business ideasand unconventional approaches for business linkages for the rural poor.

Part 2: Commune Development Budget

Provision of Grants to finance Sub-Projects to support the implementation of the CommuneDevelopment Plans, including:

Small scale communal infrastructure activities including, but not limited to, road repair, micro-irrigation systems, and markets;Livelihood support to the poor to assist them to form common interest groups, developnecessary skills and explore linkage with credit and markets;

> Support for women's social and economic development activities; and3 Operation and maintenance.

Part 3: Capacity Building and Communication

Strengthening human resource capacity of all Project stakeholders at Central, Province, District,Commune, and Village levels, including capacity building for:

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IThe Second Northern Mountains Poverty Reduction Project- Additional FinancingCredit Number 5596 - VN Financial statementsDien Bien Province Year ended 31 December 2017

> District and Commune staff to prepare socio-economic development plans and facilitate theirprocess;

> Project staff and local cadre training on the Project's implementation and management;Ir Training onjob skills and knowledge for employment opportunities;I> Safeguarding assets of communes and households including understanding and mitigatingnatural disaster risks, and climate change adaptation;

o Information sharing and learning and communication; and0> Institutional development.

Part 4: Proiect Management

Provision of support for effective Project management, monitoring, and evaluation, includingfacilitation of implementation, coordination, and quality enhancement efforts, in addition to internaland external supervision and auditing.

The Project is implemented in 6 provinces, including Lao Cai, Yen Bai, Hoa Binh, Son La, DienBien and Lai Chau by the Ministry of Planning and Investment of Vietnam under a decentralizedsystem consisting of 6 implementing Provincial Project Management Units ("PPMUs"). EachPPMU shall be responsible for managing and coordinating the implementation of the Project'sactivities within its respective Province, including preparing and implementing provincial annualwork and procurement plans and budgets; managing procurement, financing management, anddisbursement; coordinating and managing capacity building plans and training; and providingtechnical support and guidance to Districts, Communes, and Villages,

In Dien Bien, the Project is impletemented by Dien Bien Provincial Department of Planning and

I Investment, and managed by The Project Management Unit of the Second Poverty ReductionProject - Dien Bien Province ("Dien Bien PPMU"), whose office is located in 07 May Street, MuongThanh Ward, Dien Bien City, Dien Bien Province, and 04 District Project Management Units("DPMUs") and 38 Commune Development Boards ("CDBs"), including:

P Muong Ang DPMU and CDBs;> Tua Chua DPMU and CDBs;I- Muong Cha DPMU and CDBs; ando Dien Bien Dong DPMU and CDBs.

2. Principal Accounting Policies

a. Basis of preparation of the Financial Statements

The annual accounting period commences from 1st January and ends at 31st December.

The financial statements are prepared in accordance with the requirements of the InternationalDevelopment Association and presented in Vietnam Dong (VND), except for the Statement ofDesignated Account is prepared in United State Dollar (USD) and Statement of Withdrawals isprepared in VND and USD.

The Financial statements are prepared for funds received and disbursements in Dien Bien province.The principal accounting policies are summarized as below:

b. Foreign currencies

Receipts from the IDA and disbursements in foreign currencies are converted to VND underexchange rates announced by the service bank (mentioned at Note 2d) at transaction dates.

Before 2017, monetary items denominated in foreign currencies were not revalued annually atbalance sheet date as the provisions on Circular No. 195/2012/TT-BTC dated 15 November2012. However, to provide more reliable and relevant information of the Project's financialposition, such items are annually re-evaluated at actual exchange rates (buying exchange ratewith assets / selling exchange rate with liabilities) of the serving bank at the balance sheet dateon the Financial Statements of 2017. All exchange differences as a result of the revaluation are

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recorded and presented as "Foreign exchange differences" on Statement of Receipt,Disbursement and Fund balance (Note 9).

c. Receipt and Disbursement

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> Receipts from the IDA are recorded when remittance made into Designated Account or directpayment made to the contractors/suppliers;

> Receipts from the Vietnamese Government (the counterpart fund) are recorded whenpayments are made directly from the Vietnamese Government to contractors/ suppliers of theProject or funds are remitted to the PPMU or DPMUs for settlement of the Project's activities.

> Other receipts include receipts from beneficiary contribution and surplus/(deficit) of bankinterests over bank charges. In particular, receipts from beneficiary contribution are recordedwhen that are actually paid to the CDBs.

Disbursement:

Disbursements are recognized when payments are made by the Project to contractors/suppliersor beneficiaries for relevant activities under the Projects' parts.

d. Designated account and its interest

Designated account is the deposit account in USD opened at Viet Nam Bank for Agriculture andRural Development - Dien Bien branch for the Project's activities. Payments made via theDesignated account are for eligible expenditures of the Project in accordance with the provisionsof the Credit Number 5596-VN dated 09/07/2015. These payments also contain amountstransferred to the DPMUs' accounts for settlement of the Project's activities at district level, Acommune level and villa level under withdrawal applications are made by the DPMUs.

Interests of the Designated account are considered as receipt of the State Budget and initiallyrecorded as Other receipts in Statement of Receipt, Disbursement and Fund balance to coverbank charges. At the end of Project, outstanding interests will be returned to the VietnameseGovernment. In case bank charges are not fully covered by the interests, it will be settled by theVietnamese Government (according to Circular No. 11 1/2016/TT-BTC dated 30 June 2016).

3. Receipts from the International Development Association

Year 2017 Accumulated to 31/12/2017USD Equivalent to VND USD Equivalent to VND

Designated accountAdvance 2,300,000.00 51,612,000,000 5,299,985.00 118,121,667,450Reimbursement 1,636,655.01 36,898,387,200 1,636,655.01 36,898,387,200

3,936,655.01 88,610,387,200 6,936,640.01 155,020,054,650

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IThe Second Northern Mountains Poverty Reduction Project-Additional FinancingCredit Number 5596 - VN Financial statementsDien Bien Province Year ended 31 December 2017

4. Receipts from the Vietnamese Government

Accumulated Accumulatedto 31/12/2016 Year 2017 to 31/12/2017

VND VND VND

Dien Bien PPMU 901,000,000 2,177,031,390 3,078,031,390Muong Ang DPMU 760,000,000 2,006,095,046 2,766,095,046Tua Chua DPMU 916,000,000 2,408,029,335 3,324,029,335Muong Cha DPMU 800,000,000 2,568,131,000 3,368,131,000Dien Bien Dong DPMU 1,140,000,000 1,447,203,033 2,587,203,033

4,517,000,000 10,606,489,804 15,123,489,804

5. Others receipts

Accumulated3 Year 2017 to 31/12/2017VND VND

Beneficiary contributions 8,051,960,443 9,079,950,361Surplus of bank interests over bank charges 1,830,769 5,283,718

8,053,791,212 9,085,234,079

6. Disbursement

I Disbursement by categories:

Year 2017IDA Counterpart fund Others Total

VND VND VND VND

Grants and Innovation 42,876,079,738 - 8,352,289,293 51,228,369,031I GrantsWorks, Goods, 43,250,807,398 10,692,261,871 - 53,943,069,269Consultants' services,Training andIncremental OperatingCosts

3 86,126,887,136 10,692,261,871 8,352,289,293 106,171,438,300

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IThe Second Northern Mountains Poverty Reduction Project- Additional FinancingCredit Number 5596 - VN Financial statements

Dien Bien Province Year ended 31 December 2017

Accumulated to 31/12/2017IDA Counterpart fund Others Total

VND VND VND VND

Grants and Innovation 66,089,421,149 - 8,995,844,591 75,085,265,740

GrantsWorks, Goods, 64,834,336,312 15,115,589,804 - 79,949,926,116

Consultants' services,Training andIncremental OperatingCosts

130,923,757,461 15,115,589,804 8,995,844,591 155,035,191,856

Credit Number 5596 - VN finances 100% of expenditures including taxes and duties.

Actual disbursement versus its plan by parts (excluse of disbursements are funded by others):

Year ended 31/12/2017Actual Planned (*) Variances

3 VND VND VND %

District economic development 36,674,553,040 37,345,450,000 (670,896,960) (1.80)Commune development budget 41,522,337,738 54,501,157,000 (12,978,819,262) (23.81)

Capacity building and 2,701,572,300 2,745,000,000 (43,427,700) (1.58)Communication 0Project management 15,920,685,929 14,561,607,000 1,359,078,929 9.33

96,819,149,007 109,153,214,000 (12,334,064,993) (11.30)

Accumulated to 31/12/2017Actual Planned Variances

VND VND VND %

District economic development 46,962,270,240 48,844,450,000 (1,882,179,760) (3.85)

Commune development budget 63,295,963,549 79,126,157,000 (15,186,638,153) (20.01)

Capacity building and 9,475,276,200 10,245,000,000 (769,723,800) (7.51)I CommunicationProject management 26,305,837,276 27,454,607,000 (1,148,769,724) (4.18)

146,039,347,265 165,670,214,000 (19,630,866,735) (11.85)

(*) According to Decision No. 43/QD-UBND dated 15 January 2018 on the adjustment of detaileddistribute state budget in 2017.

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7. Cash at bank, treasury

31/12/201631/12/2017 (Represented)

VND VND

Designated account (USD) of Dien Bien PPMU 23,469,328,425 22,357,452,118Treasury accounts (VND) of Dien Bien PPMU and DPMUs - 93,672,067Beneficiary contribution accounts (VND) of CDBs 84,388,498 384,434,620IDA fund accounts (VND) of DPMUs and CDBs 1,361,104,000 363,360Interest accounts (VND) of DPMUs and CDBs 4,354,390 3,089,589

24,919,175,313 22,839,011,754

8. Subsequent events

There have been no significant events occurring after the reporting date, which would requireadjustments or disclosures to be made in the financial statements.

9. Corresponding figures

The corresponding figures are the financial statements for the period from 09 July 2015 to 31December 2016 which were audited by AASC Limited, in which the following items have beenrepresented due to change of the policy to revaluate the exchange rate difference at the end ofthe year (Note 2b):

Financial statements for the period from 09/07/2015 to 31/12/2016Items Presented Represented Variances

VND VND VND

STATEMENT OF RECEIPT, DISBURSEMENT AND FUND BALANCEForeign exchange differences - 644,654,993 644,654,993Cash at bank, treasury 22,194,356,761 22,839,011,754 644,654,993

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10. Approval of the Financial Statements

The financial statements were approved by Provincial Project Management Unit for issuance on25 June 2018.

ITa Xuan Truong Nguyen Thi HaiDeputy Director Chief Accountant

Dien Bien, 25 June 2018

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1The Second Northern Mountains Poverty Reduction Project- Additional FinancingCredit Number 5596 - VN Financial statementsDien Bien Province Year ended 31 December 2017

RECONCILIATION OF FUNDSFor the year ended 31/12/2017

Withdrawal application Amount AmountNo. Date Currency claimed received Variances Note

(a) (b) (b-a)Designated Account

04/DB/NMPRP2 20/01/2017 USD 811,340.83 - (811,340.83) (1)05/DB/NMPRP2 21/04/2017 USD 2,300,000.00 2,300,000.0006/DB/NMPRP2 31/05/2017 USD 1,636,655.01 1,636,655.01

4,747,995.84 3,936,655.01 (811,340.83)

(1) Amount recovered by the IDA.

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aascNo.: 250618.007/BCTC.FIS2

INDEPENDENT AUDITORS' REPORT ON THE INTERNAL CONTROL SYSTEM

To: The Project Management Unit of the Provincial Poverty Reduction Project - Dien BienProvince

1 We have audited, in accordance with International Standards on Auditing, the financial statements ofThe Second Northern Mountains Poverty Reduction Project ("the Project") - Additional Financingimplemented in Dien Bien for the year ended 31 December 2017 and issued the auditors reportthereon dated 25 June 2018 with an opinion on those financial statements.

In connection with our audit of the financial statements, we also examined the effectiveness of internalcontrol over compliance with requirements that could have a direct and material financial effect on thefinancial statements as well as the internal control over financial reporting for the year ended 31December 2017.


The Provincial Project Management Unit is responsible for maintaining an effective internal control overcompliance with requirements that could have a direct and material financial effect on the financialstatements as well as the internal control over financial reporting.

Auditor's Responsibility

Our responsibility is to express an opinion on the effectiveness of internal control based on ourexamination.

Our examination was conducted in accordance with the International Standard on AssuranceEngagements (ISAE) 3000 (Revised). That standard requires that we comply with ethical requirementsand plan and perform our procedures to obtain reasonable assurance about whether, in all materialrespects, the Project has maintained an effective internal control over compliance with requirementsthat could have a direct and material financial effect on the financial statements as well as internalcontrol over financial reporting.

Our examination included obtaining an understanding, testing, and evaluating the design andoperating effectiveness of the internal control, and performing other procedures as we considerednecessary in the circumstances to obtain sufficient appropriate evidence to provide a basis for ouropinion.

Because of the inherent limitations of internal control over financial reporting, including the possibilityof collusion or improper management override of controls, material misstatements due to error or fraud

may occur and not to be prevented or detected on a regular basis. In addition, 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 that thedegree of compliance with the policies or procedures may deteriorate.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our opinion.

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Auditors' opinion

In our opinion, the Project has maintained an effective internal control over misstatements that couldhave a direct and material financial effect on the Project financial statements for the year ended 311 December 2017.AASC Limited

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Do anh Cuong Nguyen Pham HungDeputy General Director Auditor in-chargeCPA Registered No.: CPA Registered No.:0744-2018-002-1 2893-2015-002-1

Ha Noi,25 June 2018

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aascNo.: 250618.007/BCTC.FIS2

INDEPENDENT AUDITORS' REPORT ON THE COMPLIANCE

To: The Project Management Unit of the Provincial Poverty Reduction Project - Dien BienProvince

I We have audited, in accordance with International Standards on Auditing, the financial statements ofthe Second Northern Mountains Poverty Reduction Project ("the Project") - Additional Financingimplemented in Dien Bien for the year ended 31 December 2017 and issued the auditors reportthereon dated 25 June 2018 expressing an opinion on those financial statements.

In connection with the audit of the financial statements, we also performed procedures on the Project'scompliance with the Credit Number 5596 - VN dated 09 July 2015, law and regulations that have adirect and material effect on the Project's financial statements for the year ended 31 December 2017("the Requirements").


The Provincial Project Management Unit is responsible for complying with the Requirementsapplicable to the Project.

Auditor's Responsibility

Our responsibility is to express an opinion on the Project's compliance with the Requirements basedon our procedures. We limited our tests of compliance to the Requirements, and we did not testcompliance with all laws and regulations applicable to the Project.

We performed our work in accordance with the International Standard on Assurance Engagements(ISAE) 3000 (Revised). That standard requires that we comply with ethical requirements and plan andperform our procedures to obtain reasonable assurance about whether, in all material respects, theProject has complied with the Requirements.

An assurance engagement to report on the compliance with the Requirements at the Project involvesperforming procedures to obtain evidence about whether the Project's activities are free of materialnon-compliance with the Requirements, including obtaining an understanding of the internal controlrelevant to the Project's compliance with the Requirements. The procedures selected depend on theauditors' judgment, including the assessment of risks that the Project does not comply with theRequirements and whether such non-compliance could have a direct and material financial effect onthe Project's financial statements. Our procedures included testing the compliance with theRequirements we consider necessary to provide a reasonable assurance that the Requirements arecomplied by the Project.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our opinion.

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Auditors' opinion

In our opinion, the Project has complied with the Requirements that could have a direct and materialfinancial effect on the Project's financial statements for the year ended 31 December 2017.

AASC Limited

Do Manh Cuong Nguyen Pham HungDeputy General Director Auditor in-chargeCPA Registered No.: CPA Registered No.:0744-2018-002-1 2893-2015-002-1

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dien bien province -...

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