Office of the

Special Sectors Audit WingConstitution Avenue >

Islamabad

NoPA/FAP/KPKSSA/F-I5/ ?L Dated: 2 -12-2016

To,

L The Secretary, -

Economic Affairs Division,Government of PakistanPak Secretariat, Block "C".Islamabad

2: The Country Director.World Bank Resident Mission, 20-A, Shahrah-e-JamhuriatSector G-5/1, Islamabad

Subject: FOREIGN AIDED PROJECTS (FAPs) AUDIT REPORTS

Financial Attest Audits of the following FAP Audit Reports has been conducted bythis office:

S.No Name of Projects DevelopmentPartners

L Governance Support Program WorldBank(MDTF)

2. Competitive Industries Project foT Khyber Pakhtunkhwa World Bank(MDTF)

I Khyber Pakhtunkhwa-Southern Area Development World Bank(MDTF)

Project

4. evitalization and Strengthening the Health Services World Bank(MDTF)

Delivery and Nutrition Services in Crisis Affected

Districts of Khyber Pakhtunkhwa under Public Private

Partnership[

5, UpgradationRehabilitation of Road from Chakdara to World Bank(IDTF)

Madyan on the Right Bank of River Swat under

Emergency Road Recovery Project Khyber Pakhtunkhwa

6. Economic Revitalization in Khyber Pakhtunkhwa World World Bank(MDTF)

L _ Bank/MDTF Grant No.TF.99175-Pak

2 Certificate/Financial Attest alongwith the Audit Report containing therein themanagement letter (ML) on the same is attached herewith. The referred is hereby isucd

simultaneously to the Government (to EAD) and to the World Bank Resident Mission

Islarnabad.

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FINANCIAL ATTEST AUDIT REPORT

ON THE ACCOUNTS OF

REVITALIZATION AND STRENGTHENINGTHE HEALTH SERVICES DELIVERY AND

NUTRITION SERVICES IN CRISISAFFECTED DISTRICTS OF KHYBER

PAKHTUNKIHWA

PUBLIC PRIVATE PARTNERSHIP (MLDTF)

HEALTH DEPARTMENTGOVERNMENT OF

KHYBER PAKHTUNKHWA

FOR THE FINANCIAL YEAR 2015-16

AUDITOR GENERAL OF PAKISTANISLAMABAD

FINANCIAL ATTEST AUDIT REPORT

ON THE ACCOUNTS OF

REVITALIZATION AND STRENGTHENINGTHE HEALTH SERVICES DELIVERY AND

NUTRITION SERVICES IN CRISISAFFECTED DISTRICTS OF KHYBER

PAKHTUNKIIWA

PUBLIC PRIVATE PARTNERSHIP (MDTF)

HEALTH DEPARTMENTGOVERNMENT OF

KHYBER PAKHTUNKHWA

FOR THE FINANCIAL YEAR 2015-16

AUDITOR GENERAL OF PAKISTANISLAMABAD

TABLE OF CONTENTS

Abbreviations and Acronyms................. ....................

Preface .............. 2.............. ............ 2

PART-1

Project Overview .... .............................................. 3

Auditor's Report to the management (Audit Opinion)............. ......... .. 4

Financial Statements ....................................... 6

PART-II

Covering letter to the management .............. ........................- 17

Executive summary .....- . .................... ............... 18

Management letter...........-....-----.-.......... ........... 19

Introduction..... -............................ ........ 20

2. Audit Objectives .................. ........................ 22

3. Audit Scope and Methodology ..... ........... .................. .-22

4. AUDIT FINDINGS AND RECOMMENDATIONS........ ............ 23

4.1 Organization and Management.................................234-2 Financial Management..... ......... ........................ 234.3 Procurement and Contract Management...........................254.4 Asset Management..........................................264.5 Monitoring and Evaluation ............. ........................ 274,6 Compliance with grants / loan covenants.................. ...... 274,7 Environment............................... ..... 274.8 Sustainability ..... ................. ................ ...... 274.9 Overall Assessment............................ ..... 275, CONCLUSION........................... ................ ............ 28

ACKNOWLEDGEMENT ..... ..-............... ......... ............. 29

Abbreviations and Acronyms

ADP Annual Development Program

BOQ Bill of Quantity

B10 Basic Health Unit

CTR Central Treasury Rules

DI1Q District Head Quarter

ECNEC ENecutive Committee of National Uconomic Council

FMM Financial Management Manual

GCC General Conditions of Contract

GFR General Financial Rules

IBRD International Bank for Reconstruction and Development

IDA International Development Association

INTOSAI International Organization for Supreme Audit Institutions

KP Khyber Pakhtunkhwa

MDTF Multi Donor Trust Fund

PC-1 Planning Commission Proforma-1

PCNA Post Crisis Need Assessment

PDWP Provincial Development Working Party

CoA Chart of Accounts

PSC Project Steering Committee

ISSAl International Standards of Supreme Audit Institutions

IPSAS International Public Sector Accounting Standards

TOR Terms of Reference

PREFACE

The Auditor General conducts audits subject to Articles 169 and 170 of the

Constitution of the Islamic Republic of Pakistan 1973, read with Sections 8 and 12 of

the Auditor-General's (Functions, Powers & Terms and Conditions of Service)

Ordinance, 2001. The Financial Attest Audit of the "Revitalization and Strengthening

the Health Services Delivery and Nutrition Services in Crisis Affected Districts of

Khyber Pakhtunkbwa under Public Private Partnership (MDTF)" was carried out

accordingly.

The Directorate General Audit Khyber Pakhtunkhwa conducted audit of

"Revitalization and Strengthening the Health Services Delivery and Nutrition

Services in Crisis Affected Districts of Khyber Pakhtunkhwa under Public Private

Partnership (MDTF)" Project during November, 2016 for financial year 2015-16 with

a view to reporting significant findings to stakeholders. Audit examined the economy,

efficiency, and effectiveness aspects of the Project. In addition, audit also assessed, on

test check basis, whether the management complied with applicable laws, rules and

regulations in managing the Project. The Audit Report indicates specific actions that.

if taken, will help the management realize the objectives of the Project.

The Report consists of two parts. Part-1 contains Auditor's Report (Audit Opinion)

and Financial Statements. Part-l contains Executive Summary, Management Letter

and Audit Findings.

The Report has been prepared for submission to the Multi Donor Trust Fund (MDTF)

in terms of its Grant Agreement with the Government of Islamic Republic of Pakistan.

Dated: ).9/12/2016 (Javed Iqbai)Peshawar Director General Audit,

Khyber Pakhtunkhwa

2

PART-I

1. PROJECT OVERVIEW

2. AUDITOR'S REPORT TO MANAGEMENT

3. FINANCIAL STATEMENTS

PROJECT OVERVIEW

Name of the Project: Revitalization and Strengthening the HealthServices Delivery ard Nutrition Services inCrisis Affected Districts of KhyberPakhtunkhwa under Public Private Partnership

Sponsoring Agency: MDTF through World Bank

Executing Authority: Health Department Government of KhyberPakhtunkhwa

Grant No.: TF 11062 PK

PC-I Cost: Rs.I,004.66 million

Date of Coin mencement: July, 2012

Actual Date of Commencement: July, 2012

Date of Completion: June, 2016

Date of Approval by ECNEC: 29-07-2012

Loan Closing Date: 31 October, 2015

Grant Provision status in 2015-16: Rs.319.800 million

Grant utilization status in 2015-16: Rs. 150.944 million

Progressive expenditure up toApril 2016: Rs.572.797 million

3

OFFICE OF TRE DGA 9211309

DIRECTOR GENERAL AUDIT Dir: =9211306KHYBER PAKHTUNKHWA Fax: 9211265

PESHAWAR PBX:= 9211250-54

AUDITOR'S REPORT

We have audited the accompanying Financial Statements of project

"Revitalization and Strengthening the Health Services Delivery and Nutrition

Services in Crisis Affected Districts of Khyber Pakhtunkhwa under Public Private

Partnership (MDTF)" that comprises of Statement of Receipts and Payments,

Statement of Comparison of Budget and Actual together with the notes forming part

thereof for the year ended June, 2016.

Management Responsibility

It is the responsibility of Project Management to establish and maintain a

system of internal control, and prepare and present the Statements of Receipts and

Payments in conformity with the requirements of Cash Basis IPSAS, Financial

Reporting under the Cash Basis of Accounting Standard.

Auditor's Responsibility

The responsibility of the Auditor is to express an opinion on the Financial

Statements based on the audit conducted. We conducted our audit in accordance with

the International Standards of Supreme Audit Institutions. Those standards require

that we plan and perform the audit to obtain reasonable assurance about whether the

Financial Statements are free of material misstatements. The audit process includes

examining, on a test basis, evidence supporting the amounts and disclosures in the

Financial Statements. It also includes assessing the Accounting Principles used and

significant estimates made by management, as well as evaluating the overall statement

presentation. We believe that our audit provides a reasonable basis for our opinion.

4

Opinion

In our opinion:

a) The Financial Statements present fairly, in all material respects, the cash

receipts and payments by the project for the year ended June, 2016 in

accordance with Cash Basis IPSAS, Financial Reporting under the Cash Basis

of Accounting Standard.

b) The expenditure has been incurred in accordance with the requirements of

legal agreements.

Dated: >-/12/2016 (Javed Iqbal)Peshawar Director General Audit,

Khyber Pakhtunkhwa

5

FINANCIAL STATEMENTS

Revitalization and Strengthening the Health Services Delivery and

Nutrition Services in Crisis Affected Districts of Khyber Pakhtunkhwa

under Public Private Partnership (MDTF)

For the year ended on 3 0"h June, 2016

Page No

Statement of Cash Receipts & Payments 7

Statement of comparison of budget & actual amounts 8

Notes to the Financial Statements 9

6

Revitalizing Health and Nutrition Services in Crises Affected Districts of KP

Statement of Cash Receipts and Payments

For the year ended June 30, 2016Note 2015-16 2014-15

Receipts(?ayments)Controlled by Payment by Third Receipts(Payrneits) Payment by

Project Parties Controlled by Project Third Parties

I_ Rupees

Externa. Assista nce 5 123,447,440 171,405,768Total Receipts 123,447,440 - 171,405,768

Payments

Consultancy Sewces 6 137,344,010 363,886,768

Operat:n Expenses 17 4676,728 9608 857

Goods S 7,455,633 14,895 203

Trinng 9_ _ 1,468,039 3,371.932

Total Payments I 150,94410 - 390,762,760

InCreas e (De4 reasel in casn (27,496,970) 219S, 35 6, 992)

Ca sh st the BA.ginning ofyezar 33,272,675 2412,529,667

Cash at 'he rr;rJceof Year 5,675,705 33,172,675

Project Coordinator

Revitalizing Health and Nutrition Services in Crises Affected Districts of KP

Statement of Comparison of Budget & Actual Amount

For the year ended June 30, 2016

Not I2015416 - 201445SActual

Budgeted Amount Actual Amount Budgeted Amount Amount

ExternM AssEance 5 23 447,440 123,447,440 :71,405,768 -

TotaReceipts 123,47440 123,447,440 171405,768

Payrnents ________________________________

____

Consultancy c--S 6 39,00000I 137 344,010 364,000,000 363883763

.perat;flg Expenses 7 3000,000 4 B76,728 8,650,000 9608857

Gonds 8 3,000,000 7 455,633 1,40000 14893203

Trav ngs 9 2,000,000 4)8,039 4,80,000 3371932

Tota Paymets 157,000000 15044,410 393930,0D ____ 390,72,70

Pro ect Coordinator

Revitalizing Health and Nutrition Services in Crises Affected Districts of KP

Notes to the Financial Statements

For the year ended June 30, 2016

Reporting Entity

The fiancal statemerts are for "Revitlizing/Strengthening Health and Nutrition Se:vices in Crises Alfeceo Disticts of KK

Projeci, The finanral statement enconmpasses the reporting entity as defined in the Financirg Agremernt between the Islarric

RepubLic cf Pakistan and the Wcr d Bank. The Finarins At-|.reemert was signed on April 12, 2L72 for an arnount of US $161MI

The projec became effective from Apnil 12, 2012 with the closing date of April 12, 2016.

USS 5-8 sniflion has been concelNed in Mune 2094 o the request cf the Borrower ord 9toa grant available to project is US$ U.2

müijWqn.

The objective of revtaäzingjStrengthening Health and Nutrition Servkes in Crises Affected Districts of KP" Proect is to:

I mprove .ibuity, a:cessibili:y and quality of helth care services at -e stricts leveL

2 Strengt-. rnzianagement of hEahh services in the ::strict5 through a puo c private partnership model-

3. nstitutin.aäze an effective monitoring and evaluation systern to facilite learning and evder.ce based decision making,

During the year 2014-45, t:e proje:t has been restructured in November 2014 to delete cornponent 11 and drop District i

i: hem cn:tract out srcpe Il 30th of June 2C15. The Pro;ect is rnplemented throuJgh Health Department GoKP.

Financing

The financinr is made in the form of Gran-, based on Standard Wor'd BUnk :erms. The Financing Agreenent No Is TF-11062-

PAK.

2 Cenification by PrlecI ManagernEänt on AppIlCaion of Funds

Te "Re...aliing]5trengthe:Lng Heath and Nuuition Services in Cr-ses Aftected ':str.cts of KF" project management certitied

inatcthe fundsa nve en appied/expenditure Jave beer incurred for the purpo'es iteded in he finaning agreernent

3 Accounting Convention and Statement of Compance

The financial statements have been prepared Ln accordance with Cash Basis IPSAS 'FinanciaL' Reporting under the Cash Basis of

Accountiig' standard.

Th accountng policies have been appled cor.st tntly througlCut the perio.

4 Significant Accounting Policies

4 1 Pcruign Currency Tronsactin

Cash receipts and payments arisirr F-om transactions in foreIgn curren6i2S are recorded In Fa:x Rupee by applylng to the

foregn currency amount, the exchange rate between the Pak Rupee and th Foreign Currency a: the date of the rCei5ts and

Dayments- Exchange differences aris*ng on settlement of these transaction, are recognized in the S:atement of Receipts and

Paym ents

4.2 Reporting Currency

A. T-moun- in the finarcial statements are in ?ak Rupees.

4.3 Recognition of Expenditure

EXpenditue it recognized on the date when payment i5 made or cheque is issued. Financial year to which the payments

pertain is determined by the date on which a cheque or payment advice is issued,

4.4 Employee Terminal Senefits

5e,vice 6enefits of government deputations empicyees are accounted for in their respective departments white no services

terminal benefirs are paid to the con-factual employees.

Project Coordinator

to

Revitalizing Health and Nutrition Services in Crises Affected Districts of KP

Notes to the Financial Statements

For the year ended June 30, 2016

External Assistance

Externa assstance was received in the form of Grant from the World Bank under financing agreement dated

April 12, 2012 between the World Bank and Government of Pakistan (GOP) for the purpose of the Rev'talizing

Health and Nutrition Services in Crises Affected Dstricts of KP Project- The following amounts were received

by the Project during the period-

2015-16 2014-15

UPak Rupees us$ Pak Rupees

SE Procedures 5.1 1,182,53S 123,447,440 1,669,489 171,405,768

1,13,538123,47,440 1,569,489 171,405,758

51 T:is represents funds transferred to the Revitalizing Health and Nutrition Services in Crises Affected

Districts or KP Project's Designated US Dollar Bank Account by the Wcrld Bank on the basis of Withdrawal

Application(s) submitted by the Project-

There has been no instance of non compl ance with the terms and conditions of the financing agreement

between the World Bank and GoP which have resulted in cancellation of Credit.

Undrawn External

Assistance

Jndrawn Credit at report;ng date represent amounts specified in the financing agreement between the World

Bank and GOP that the World Bank will cisburse for Revitalizing Health and Nutrition Services in Crises

Affected D-tricts of KP project purposes.

2015-15 2014-15

Note Amounts in US $

Closing Balance 55,986.97 5,530,511

55,986.97 5,530,511

Tñe redCed Closing Daonce is duc to cancenalotiOn of US$ 5.8 milyiOn from

the total sign ed amöunt

Consu!tancy Services

2015-16 2014-15

Note Amounts in Pak Rupees

Individuals(Component-3' 6.1 9,032,253 559066

Firrns (Component-1) 6.2 I28311,757

Consultancy 137,344,Ö10 6,355303

oods 331,940,799

358,296,102

137,344,010 363,886,768

61 -ihis represents the long term consultants hired for the pu,poses of financial management

ar:angements at the project, rnonitoring project activities, development cf MlS/GRM , Procurernert

documentation systen för the Projec validation of progress of service delivery at distriets by Lmplementing

?artners etc.

6.2 This represerts paymern to Irplemernting partriers as per contract agreement with them for

managernent of health facl-ities in the target districts under the Project.

/2-

Operating Expenses 2015-1f 2014-15

Note Anounts in Pak Rupees

Remnnerat4on and

Sa laris 7-1 2,193,323 4,999,160

General Operating

Expenditures 7.2 2,483,405 3,609,697

4,676,728 8,608,857

2015-16 2014-15

Amounts in Pak Rupees

Salries- Officers 7- 1743,323 3,007,377

Salaries- Staff 450,000 1,99L783

2,193,323 4,999,160

General Operatirig

Expendiures 7.2 2015-16 2014-15

Amounts in Pak Rupees

commrnurnications 5,820

U:ies 253,692 242,007

R en( of Buid 726, 000 1,424,023

TAIDA 584,070 424565

13

379>449 444, 2POL Grge

4990 4,990Conveyan ce Charges

sZ1t2ery Charges 70,830 144,223

I8,608Parng Charges

4,7 12News papers471

172,57 149,203

Medi;aI Charges 3,900

2,122

Paymenm o G2her0s for00Sc rvces Re:dý c :d

Olhers109,433 107,076Others

Pension Contribution 119,798 85,366

239,536

E rå'er1ainment

Repair of Transport

Repair cfan 20,00 14,020

26,459Repair of Furniture

10,700

2,483,40S 3,609,697

. .¼•!•!!!ees es

Goods a 2015-16 2014-15

Amounts In Pak Rupees

Trzansport 3.1 21,502,034

Plant & nacir.ery 8-2 1,335,353 723,158

FLrniture & Fixtures 83 1,306,136

Computer Equipment 8.4 1,354,375

Procurement of Goods

by Consultant Firm

(Componet-1) 83 6, 12 0,270

7,455,633 14,895,203

Trainings 9 2015-15 2014-15

Amounts i Pak Rupees

Trainings/Vorkshops 9.1 1,170,915 3,043,666

Workshops/Conferences 9-2 297,124 32S,266

1,468,039 3,371,932

Cash at Bank 2015-16 2014-15

AmoUnts in Pak Rupees

Casht Bank 5,675,705 33,172,675

5,675,705 33172,675

Authorizat]On for :ssue

hese finrtie:' statements have been authorized for issue by the Pro,ect

Coordinator on Novernber 07, 2016.

Genera:l

Figu:es have been rounded off

-: the nEýarest rupee.

Corparative figures have been rearranged where necessary for the

puro D2 :omparnO~

Project Coordinator