Office of the

Auditor-General of Pakistan Special Sector Audit Wing

Constitution Avenue

Islamabad

No.PA/FAP/Sindh/SSA/F-14/ f c I Dated: 30 -12-2016

To, 1.

/ ;l..

/

Subject:-

The Secretary Economic Affairs Division, Government of Pakistan Pak Secretariat Block-C Islamabad

The Country Director, World Bank, Resident Jvfission

20A, Shahrah-e-Jamhuriat

G-5/ 1, Islamabad

FOREIGN AIDED PROJECTS {FAPs} AUDIT REPORTS

Financial Attest Audits of the following F AP Audit Report bas been conducted by

this office:

S.No Name of Projects Name of Development Partners

I. Sindh Water Sector Improvement Project WB

2. Sindh Global Partnership for Education WB

3 Sindh Barrages Improvement Phase-I Proj ect WB

-4.v Sindh Public Sector Management Reform Project WB

5. 2"0 Sindh Education Sector Reform Program WB

6. Sindh Irrigated Agriculture Productivity Enhancement WB

Project

7. Enhanced Nutrition for Mothers and Children WB

8. Sindh Agriculture Growth Project (Agriculture) WB

9. Sindh Agriculture Grow-th Project (Livestock) WB

10. Sindh Skills Development Project (BBSYDP) WB

I!. Sindh Skills Development Proj ect (STEVTA) WB

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Financial Attest Audit Report on the Accounts of Sindh Public Sector Management Reforn1 Project under loan agreement IDA C redit # 5584-PKKarachi, International Development Association (IDA) for the Financial Year 2015-16.

Auditor General of Pakistan Islamabad

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PREFACE

The Auditor Genera l conducts audi t s ubj.:ct to Article 169 and 170 of the Constitution of the

Islamic Republ ic of Pakistan 1973, read with section 8 and 12 of the Auditor Genera l's (Functions, Powers and Terms and Conditions of Service) Ordinance 200 I .

The Directorate Genera l Audit Sindh conducted audi t of Sindh Public Sector Management

Reform Project during I 0'11

October.2016 for the period 11 '" March 20 15 to 30'11 June 2016 with

a view to reporting s igni fi cant fi nd ings LO the stakeholders. Audit examined the economy,

efficiency, and effectiveness aspects of Sindh Publ ic Sector Management Refom, Proj ect. In

add ition, Aud it also assessed, on test basis, whether the management complied with applicable

laws, rules. and regulations in managing the Sindh Public Sector Management Reform Project.

The Audit Report ind icates specific actions that. if taken, wi ll help the management realize the

objecti ves of Sindh Publ ic Sector Management Reform Project. The observations included in this report have been final ized in the light of d iscussions in the Exit meeting.

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

Financial Statements. Part-I I conta ins Executive Summary. Management Letcer. Audi t Findings and recommendations.

The Audi t Report is submitted LO the International Development Association (JOA) in terms of

Grant Agreement/ Development Credit between Internationa l Deve lopment Association & Islamic Republic of Pakistan.

Dated:29-12-2016

Place: Karachi

(Azh~ ~) Dire~neral

•

AGP

AU DSA DI.I· WIJ DP ERU EJ\D LEI' FC GOP

GOS ll'MIS

I lJRD IDJ\ ll'SAS ISSA I LL' I.I)

• MAI'S NFC pl)

l'FC

PFtvl SPI'

l'FM-RAI' l'FM-RS l'i\ llS

l'SM

Rl3M Sl'SMRI' SAf'

STRMP TA

ABOREVIATIONS & ACHONYMS

Auditor Ucnernl o r Pakistan Accountant General Of11cc Sindh (AGS) Debi Management Ollicc Disbursement linked indicator World Bunk Development Partner Econo111ic Reform Unit in the Finance Dcpar1111ent Economic Alfairs Division Eligible Expenditure Program Foreign Currency Govern111cnt o f' Pakistan Government of Sindh Integrated Financial Management Information System (also known as ··PIFRA'')

International Bank for Re,onstruction and Development International Development Agency International Public Sector Accounting Standards International Stmidard of Supreme Audit Institutions Leller of Credit Linc Depnrlment Methodology for Assessing Procurement Systems Nationnl Finance Co111111ission Project Director Provincial Finance Commission Pt1blic Finnncial Management Support Program in Pakistan (EU1

PFM Rcforrn Action Plan l'FM Reform Strategy Projecl Management lnfor111n1ion System Publ ic Sector Management Result Based Management Sindh Public Sector Management Reform Project Social Action Plan Sindh Tax Revenue Mobili1.a1ion Plan Tcclrnical Assistance (TA)

II

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TABLE OF CONTENTS

PREFACE

1\ 13BREVIATION lfa. ACRONYMS

l'art-1

Part-II

I.

2. ]

4.

·LI 4.2 4.J 4.4

4 .5 •1.6 4.7

4.8 s.

Project Overview Auditor's Report to the Management (Audit Opinion) Financial Statements

M,magcment Leiter Executive Summary INTRODUCTION AUDIT OBJECTIVES AUIJIT SCOPE AND METHODOLOGY AUDIT FINDINGS ANO RECOMMENDATIONS

Orgnnizatio11 & Management Financial Management Procurement and Cont rnct Management Monitoring and Evaluation Compliance with Gr:rntslloan covenants En vi ronmcnt Sustn inubi Ii t y

Overall Assessment CONCLUSION

ACKNOWI .EDGMENT

ANNEXUES

.,.. Page No.

ii

11 1

I \'

1-19

20 2 1 '.!2

22 22 23 23 24 27 29 JO JI JI JI 32

33

34-35

'

I' ART-I

I . Project Overview . . 111

2. ;\ utli t()r' s R.:porl to the Management (Audit Opinion) I \

J. financial !:i tatcmcnts 1-19

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Project Ovcn•icw

Numc of Project:

Sponsoring Authority:

Exccuiivc Authority: (FD)

Grant No:

Project Cosi':

Sindh Public Sector Management Reform llfojcct

lntcrnotional Development Association (IDA)

Sindh Public Sector Management Refom, Project

IDA-Loan No.5584-PK

US$ (In Million)

Finunciul Components

Si11dh Government

IDA

European Commission

Total

Date or C'om111cm;emcnt :

220

50

12

282

Actu,il Date of Commencement:

Date of Completion (os pcr Agreement):

Loan Closing Date:

Grant Uti li7.ation Status in f'Y 2015-1 6:

l'erccntage ('Y.,)

78%

18%

4%

100%,

11'" March 20 15

I 11" Morch 2015

31 ' ' August 2020

JI" August 2020

US$ J 7.2 mi llion

Progressive Expenditure upto FY 20 15-16: US$0.04 million

Gov~rnmrnt or Sindh Share: US$ 45 mil lion

iii

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Auditor's Report on the Sindh Public Sector Management Reform Project Financial Slatcrnents

We have audited the accompanying fi nancial statc111ents of Sindh Public Sector Management Refom, Project executed by Finance Department, Govern111ent of Sindh Loan Agreement IDA-Loan No.5584-PK, that comprise of Statement of Receipts & Payments, Statements of Comparison of Bt1dget & Actual together with the no tes for111 ing part thereof for the year ended June 30, 2016.

Managemen t Res pons ibi lity

It is the responsibi li ty of projec1 management to establish and maintain a system of inlernal control and prepare and present the Statement of Receipt and Payment in conform ily with the requirements of Cash Basis IPS1\ S. Financial Reporting under the Cash Basis of Accounting Standard.

Auditor's Responsibi lity

The responsibility of the audi tor is to express an opinion on the financial statements based on the audit conducted. We concl uctecl our audit in accordance with lnlernational Standards of Supreme Audit Insti tu tions. Those standards require that we plan and perform the audit Lo

obtain reasonable assurance about whether the financial statements are free of material misstatements. The aud it process includes exi11nining, on a test basis. evidence supporting lhe amounts and disclosures in the fi nancial statements. It also includes assessing the accounting principles used and significant eslimates made by management. as well as evaluating the overall statement presentation. We believe that our audit provides a reasonable basis for our opinion.

Opinion In our opinion:

a) The financia l statements present fa irl y. in all material respects, the cash receipts and payments by the project for the year ended 30'11 June 20 16 in accordance with Cash Basis lPSAS. Financial Reporting under the Cash Basis of Accounting Standard.

b) The expenditure has been incurred in accordance with the requi rements of legal agreemen LS.

Dated: 29-12-20 I 6

IV

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,,. Government of Sindh Finance Department

(Economic Refonn Unit)

SINDH PUBLIC SECTOR MANAGEMENT REFORM PROJECT Finance Department, Government ofSindh

IDA Credit No. 55840-PK.

FJNANCAL STATEMENTS

OF THE

SJNDH PUBLIC SECTOR MANAGEMENT REFORM PROJECT (SPSMRP)

I "July 2015 to 30e, Jwic 2016

Page I of 19

Oovemmem of Sindh Finnnce Deparlmcnt

·(Economic Reform Uni1)

SINDH PUBLIC SECTOR MANAGEMENT REFORM PROJECT Finance Department, Government of Sindh

IDA Credit No. 55840-PK.

. PROJECT OVERVIEW

Name of Project Sindh Public Sector Management Refom, Projcct(SPSMR P)

Sponsoring Authority The World Bank (IDA)/Covernmcnt ofSindh

Ex~cutive Authority Government ,,f Sindh

Credit No IDA Credit II 5584-PK

Projeci/Loan Amounl $ 50 Mi llion

Dnte of Commencement I lm March'201 5 -

Ac.rtu1J Date of Commencement 11 "' March '2015

Date of Completion (PAD) 31" August'2020

Loan Closing Date 3 1" August'2020

Loan Utiliza1ion Status in FY 20 l 5- 16 in respect of Non-Food Account US$5.20 Million (PKR 545 Mil lion)

Loan Status in FY 2015-16 in respect Received From I DA US$ 1.5 1 Million (PKR 158 Mi llion) ofTA fund Expenditures Incurred US$ 0.04 Mi llion (PKR 4.24 Million)

Progressive Expenditure up till FY SPSMRP Share: US$ 17.2 Millio1i (PKR l,800 Million) 20 15-16 GoS Shares: US$ 45 Million. (PKR 4,6 l 5 Million)

Total Share: US$ 62.2 Million (PKR 6,415 Million)

. .., USS role Is of July 22 , 2016 ,.t.PKll l0~.731·,

Page 2 of I?

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Govcmment of Sindh Finru,cc Department

(Economic Refon11 Unit)

SINDH PUBLIC SECTOR MANAGEMENT REFORM PROJECT Finance Deportment, Government ofSindh

!DA Credit No. 55840-PK.

S lnlr menl or Compa rison or Oudget & Act unl Ex1,enditur• by O bjoct for th• Period Ended on JO .. June' 2016.

PKR(ln Millions)2015-16 PK R (ln Millions) 20 14· 15

Oudgetrd V• rlance Budgeted V•riAnct

ParCicul• rs Arnount Actual Amonnt Aclunl

Original Finni Ex11rndlture

Doi once % Original Final Expendlturu Balance

Ellglhlt E.>:1><11d/l"rt l'rogram

Finance (including Slndh 1,223 1.176 954 222 19 1,0 19 1,017 779 238 Revenue Boardl

Planning & Development

343 362 JOO 62 17 282 2 17 2 12 5 (including Sl'PRAI Exci,e &

1,053 1.137 1,122 15 I 1,021 l ,139 1,072 67 Taxation

Board of Revenue 1.007 1.040 1,010 30 3 862 1,3 33 970 363

Sub-Total J,626 J,715 J ,.186 328 9 3,184 J,706 3,033 673

Ttc/111/cal As.,L;111nct

Goods . . . . . . . . . Consulii ng

Services . . 2 . . . . . .

Non-Consulting Services

. . . . . . . . .

Traininu. . . 2 . . . . . . lncremenlal

Qn,rotino Costs . . . . . . . . .

Sub·To1al JOO 45 4 >11 9 . . . .

GrAnd To tal J ,726 J ,760 3,.190 370 10 3,184 3,706 3 ,033 673

• v 11ri11ntt is t 11ftulatt d a1; (Fin1I Uudgct - Actual E11,cnditurt}lf1n11I Uudgct I . fl-.

%

23

2

6

27

18

.

.

.

.

18

Page ~ of 19

Govemmen1 ofSindh Finance Depanmem

(Economic Refom1 Uni1)

SINDH PUBLIC SECTOR MAt':JAGEMENT REFORM PROJECT Finance Departrnen1, Government ofSindh

IPA Credit No. 55840-PK.

Statement o re I R ecelnts 85 l &P nvmen rs or the p . E en od ndcd on J o·• J 0 une 2 16. PKR (In Mi llions) 2015-16

PKR Receip1s/P11ymen1 Payme111 by

Retroactive (In Millions) Cumula1ive s Con1tol led by Third-Pany

Financing 2014-15 Government Accounts

RECEIPTS Note$

Government of Sindh 14 2,837 - - 1,778 4,615 · !DA-Eli gible

15 703 - - 1,255 1,958 Expendi1ure Program

Total nccelpts 3,540 - - 3,033 6,573

PAYMENTS

Eligible Expem/1111,e J'r01w1111

Employee Related 16 3,386 - - 3,0JJ 6,419 Expenditure

Total Payments J,386 3,033 6,419

CASH 01 lhe beginning -of vcar - - - -

Increase/Decrease in 17 154 154 CASH - - -

CASH al 1he end of year . J,540 3,540 (On lance) - - -

I

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Page 3 of 19

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Government ofSM'dh f.inance Department

(Economic Reform Unit)

StNDH PUBLIC SECTOR MANAGEMENT REFORM PROJECT Finance Department, Govcmmcnt of Sindh

IDA Credit No. 55840-PK.

3. STATEMENT OF COMPLIANCE

These financial statements have been prepared in accordance with the New Accounting Model (NAM). Jn December 2000. Auditor General or Pakistan prescribed NAM with the approval of the President of Pakistan under i\11 iclc l 70 of the Con~titut ion of Jslninic Republ ic of Pakistan and the

implementation of NAM is an ongoing process.

4. ACCOUNTING CONVENTION AND BASIS OF PREPARATION

These financial statements have been prepared under the ca$h basis of accounting which . recognizes transactions and events only when cash is received or paid by the entity. These financial statements have been prepared as per the requirements or NAM that suppo1t s international best practices. The statement of receipts and payments, statements of comparison of budget and actual amounts by Object and notes forming parts thereof have been prepared on the format of Cash Basis

IPSAS - Financial Reportin~ under the Cash Basis of Accounting.

S. REPORTING A.ND BUDGET PERIOD

The reporting period for this financial statement is from l"July 2015 to 30111

June 2016 and budget period of these financial statements is ( l'rom l" July 2015 to 30'h .June 2l• 16).The project and financing

agreements were signed on l llh March 20 15.

6. REPORTING CU IUU~NCY

The reporting currency of these financial statements is Pakistani Rupees (PKR).

7. SIGNIFICANT ACCOUNTlNG POLICIJ.tS. The Principal accounting policies applied in prcpa.ration of this project fi nancial statement arc set

out below. These accounting policies arc consistently appl ied to all periods presented.

Pnge 6 of 19

Government ofSindh Finance Department

(Economic Refonn Unit)

SlNDH PUBLIC SECTOR MANAGEMENT REFORM PROJECT Finance Department, Government ofSindh

' IDA Credit No. 55840-PK. J. REPORTING ENTITY AND IMI'LEMENTATION ARHAGNEMENTS.

Project Agreement dated I l'hMarch 2015 entered into between the INTERNATIONAL BANK FOR RECONSTURCTION AND DEVELOPMENT/ INTERNATIONAL DEVELOPMENT ASSOCJA TlON ("World Bank") acting as administrator of the Sindh Public Sector Management Reform Project and the PROVINCE OF SlNDH ("Sindh") in connection. with the Project Agreement ("Project Agreement") of same date between the JSLAMIC REPUBLIC OF PAKISTAN ("Recipient) and the Association. Sindh declares its commitment 10 the objectives of the Project and shall carry out the Project in accordance with the provisions of the Project Agreement.

Provincial Govcmmenr of Sindh (the Government) is the reporting ent ity which conducts its opcrntions under the Rules of Dusiness 1986.These rules were made pursuant 10 Anicle 139 of the Constitution of the Islamic Republic of Pakistan, 1973 (the Constituti·on) and envisages Provincial Government as comprising of departmenis and their attached departments.

Institutional and implementation arrangements for the project are built 10 strengthen public sector perforniance in the province ofSindh through improved revenue and expenditure management.

The Economic Reform lJnit (ERU) is responsible for policy formulation, coordination, implementation and monitoring of the initiat ives under the Project, including: (i) liaising with the relevant stakeholders; (ii) reporting on Project implementation progress, including progress in nchieving Olis, nnd monitoring EEPs; and (iii) ensuring compliance with the procurement, snfeguards, financial management, and monitoring nnd evaluation arrangements .. ft is headed by the Director, ERU who repo11s to the Finance Secretary and to the Steering Committee. In addition, various provincial institutes affi liated with the reform activities have responsibilities for SPSMRP.

2. OASIS OF CONSOLfOA TION

The financial statements have been prepared by consolidating the employee related expenditure of all the employees of Finance (including Sindh Revenue Ooard), Planning & Development Deparunent (including Sindh PPRA). Excise and Taxation and Board of Revenue.

2.1 Certification by Project Management

Funds against Credit No. 55840-PK hnve been utilized for the project purposes as defined in the. financing agreement.

Page S of 19

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• ""' Government ofSindh

Finance Department (Economic Reform Unit)

SINDH PUBLIC SECTOR MANAGEMENT REFORM PROJECT Finance Deparlmcnt, Govemment ofSindh

IDA Credil No. 55840-PK. 1. Revenue/Receipt recognilion

Revenue is recognized on the dale of receipt of money by the bank or clearance of cheque. Revenue is recognized on a gross basis and any related costs are recorded separately. Receipts represenling recovery of any previous overpayment are adjusted against relevant expendilure, if it occurs in the same financial year.

11. Recognition of expenditure

Expenditure is recognized on lhc date when payment is made or cheque is issued. Financial year to which the paymenls pe11ain is determined by the date on which a cheque or payment advice is issued. Policies for recognition of expenditure arc as follows:

a. Payments made tlu·ough cheque

Expenditure is recognized on the date the cheque is issued.

b. Inter government lr'nnsfrrs

Expenditure is recognized on the date the transfer is made by the transferor.

c. Payments directly in bank 11cco1111ts

A direct payment into bank account, expcm1ilure 1s recognized on the date the payment advice is issued to the bank.

d. Direct payments liy State Bank of Pakistan (SBP)

Repayment of loans und other direct paymcnls by the SBP, expenditure is recognized on the dote State Bank of Pakislnn advises lhe relevant accounting office.

c. Imprest payments

Expenditure is recognized when the required claim vouchers are submined and imprest account is reimbursed.

iii. Foreign currency

Transactions in foreign currencies are recorded ,in the books at the rates of exchange prevailing on the date of transaction. Exchange differences arising on settlement of these transactions are recognized in the Statement of Receipts and Paymenls, but are not disclosed separately. ·

Page 7 of 19

Government of Sindh Finance Oepartmenl

(Economic Reform Unit)

SINDH PUBLIC SECTOR MANAGEMENT REFORM PROJECT Finance Department, Government ofSindh

!DA Credit No. 55840-PK. iv. Cuh and ca,h equivalents

For the purpose of this financing agreement, the Government of Sindh Account No. I, maintained at State Bank of Pakistnn is used for the Disbursement o( Loan. The cash and cash equivalents represent advances of Technical Assistanoc by !DA to the borrower and at the end of Financial year the advance which remains un-documented/not adjusted.

V. ~

Assets are future economic benefits controlled by the government as n result of' past transactions or other past events. Assets are recorded at cost and currently no depreciation is

charged.

v1. Payment by third Party

The Government also benefits from goods and services purchased on its behalf as a result of cash payments made by the third parties during the period by way of loans and contribulions, in the shape of grants and aid. The payments made by the third parties do not constitute cash receipts or payments controlled by the Government as defined in the Cash Basis IPSAS -Financial Reporting under the Cash Bnsis of Accounting but do benefit the Government , as the Government does not receive cash (including cash equivalents) directly from, or gain conlrol of the bank accounts or similar facility established for its benefit by, the third parties. Payments by third parties, if any, are disclosed in the payments by third parties column on the face of statement of cash receipts and payments and notes to :he financial statements.

8. PROJ ECT OBJECTIVE ANO DESCRIPTIONS

The objective of the Project is to s1rengthen public sector perfo1mance in the province of Sindh through improved revenue generation and expenditure management. The Project Objectives consist of the following:

• Support to the Implementation of reform activities included in the Sindh Tax Revenue Mobilization Reform Plan, including: (a) establishing n new Tax Refonn Unit in FD; (b) supporting TRU to conduct high quality analytical studies to support the decision-making

Page 8 of 19

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Government ofSindh Finance Department

(Economic Refonn Unit)

SINDH PUBLIC SECTOR MANAGEMENT REFORM PROJECT Finance Department, Government ofSindh

I DA Credit No. 55840-PK. process associated wi th GoS tax policy and administrative re forms; (c) reviewing critical aspects of STS administrntion with the p<>tenlial to enable procedure harmonization with the other two revenue administrations in Sindh: (d} establishing a statc-of-the-ai1 training facility in sales llLX

admin istrat ion and support other pre-and in-service training activities wi thin tax agencies: (c) conducting initial stud:es to idcnti fy factors which can be employed to increase tax morale in the Province, which will serve as input to prepare large-scale taxpayer education progmms; (I)

conducting GIS and satellite imaging analysis for property tax and other tax reforms; (g) conducting regular tax payer communication, education and fncilitation activities; and (h) supporting other efforts to implement the Sindh Tax Reform plan within Board of Revenue, Excise and Taxation Department and other tax agencies including but not limited to Urban Immovable Property Tax. Stamp Act, document/property registration and related reforms.

• Support to the implementation· of the Siudh Public Financial Management Strategy, including: (a) supporting for enhancing the usage of the FMJS in Finance. P&DD and line departments; (b) improving cnsh management mechanisms including support to commitment accounting; (c) organizing trainings on the usage of FMIS reports in Finance. P&DD and iine departments; (d) supporting pre-budge t workshops and seminars (c) support ing debt management; (I) asset recording, internal control, 1tnd expenditure commitment control; (g} payroll and pension audits; (h) strengthening public accounts committees; and (i) strengthening citizen engagement and information disclosure practices.

• S1111port to im1ilemcnt11tion of pr·ocuremeut reforms, including (a) developing and implementing the c-procurcment and MIS plans by identifying l'C(J uired changes for the new technology to be effective; (b) partnering with higher education institutions and specialized training institutions to develop training modu.les which cover the ful l range of courses that arc required for building procurement ski lls of procurement officials and; (c) supporting SPPRA in developing their own capacity and strengthening their regulatory framework (implementing regulations, contract management guideline, etc).

• Support to the management of the development portfolio, including: (a) supporting capacity building activities of the Monitoring and Evaluation Cell/Development Delivery Unit within the Planning and Development Department; (b) developing systems or photo-enforced monitoring; (c) conducting satellite imaging ar\d other GIS analys is; including creation of related

Page 9 of 19

Government of Sindh Pinance Deµa11ment

(Economic Refoim Unit)

SINDli PUBLIC SECTOR MANAGEMENT REFORM PROJECT Finance Department, Government of Sindh ·

IDA Credit No. 55840-PK. infrastructure, to deepen poverty analysis for improved targeting/pro·r.oor development; and (d) supporting proactive beneficiary feedback of government development schemes and other dny­to-day service delivery areas.

Project Components

The Project consists of two complementary components: (i) results-based financing based on DLls to provide an incentive for achieving eligible publ ic sector management ("PSM") reforms (US$ 40 million), mid (ii) technical a~sistance to support activities for ach ieving DLls (US$ 10 million).Results-based linancing wi ll dist-urse agains: agreed eligible expenditure prt1gram (EEPs) based on DLls in four rcfonn areas: increasing tax revenue mobilization; enhancing performance of public financial mnnagement system; strengthening publ ic procurement performance, and improving management of the develorment portfolio.

• Component I: Results-based finuncing to provide an incentive for achieving eligible PSM reforms (USS 40 million). Under the results-based component, Credit disbursement will reimburse expenditures incurred by the Government of Sindh in selected key budget line items referred to as EEPs. The event and amount of Project disbursements will be contingent on satisfactory achievement of disbursemem linked indicators (DLls). EEPs include pay and allowanccs·for departments of F'inunce, Excise and Taxation, Planning and Development, the Board of Revenue, SPPRA, and SRB since the Project interventions will mainly focus on these organizations.

• Component 2: Technical Assistance (TA) to support capacity builcli.ng and institutional strengthening associated with achievement of eligible public sector munngcmcnt (PSM) reforms, mitigating implementation challenges and promote sustalnnbility of project outcomes (USS JO million). TA wil l be used to support all four eligible PSM reform areas: tax collection, PFM, procurement, and development monitoring. The technical assistance will consist of technical consultancies and capacity building activities, including training, seminars, conference participation, equipment purchase, and other activ ities. Efforts will be made to utilize an inclusive approach to capacity building and instituti()nal strengthening to ensure strong female representation and a pro-poor focus.

Page 10 of 19

Government of 9tlldh Finance Department

(Economic Reform Unit)

SINDH PUBLIC SECTOR MANAGEMENT REFORM PROJECT Finance Department, Govenunent of Sindh

IDA Credit No. 55840-PK. JO. PDO Level Re.,ulls Indicators

Objective POO Indicator

Measures the overall performance of the Sales Tax on Services (STS)

Improved collection of Collection. STS to be measured in :-cal terms, as three and a half percent onnual collection growth minus in nation. Pcrfomumcc is cumulative, and

Sales Tax on Services over or under- performance adjustable vis-a-vis preceding or succeeding

years.

Improved credibility of The vnriru1cc between 1~c1ual a11d budgeted expenditure composition during

budget execution the last three years, excluding contingency items; for the preceding liscal

year.

Reduced iime taken to Time taken to process ·procurement contracts proxies' procurement

process procurement performance as measured by days taken from the first advertised tender to

contacts signing. Targets measure

Page 12of19

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Govemment of Sindh Finance Depanment

·(Economic Reform Unit)

SfNDH PUBLIC SECTOR MANAGEMENT REFORM i•ROJECT Finance Department, Government ofSindh

lDA Credit No. 55840-PK.

9. DISBURSEMENT LINK lNDICA TORS (DLls)

S. No Indicator Nnme Descri r1tion ( Indicators Definition ) Approval and Initial implementation ofSindh

I. Tax Revenue Measures appro~al and implementation of STRMP. Mobilization Refonn Plan

Enhanced SRB human 2. resources capacity for Measures SRB i,uman resources capacity development progress.

administration

Measures transparency of taxpayer obligations, effectiveness of

Increased automation of systems for taxpayer registration, tax assessment, and collection of 3.

SRB tax payments through increased automation of several key systems and in particular the number of notices sent through automated system.

Risk based audi ts of Measures use of risk targeted auditing of taxpayers as a key 4.

lax payers i rn plemented activity to improve compliance and deter tax evasion and also its success with the hit rate.

Establishment of internal Measures the degree of implementation of internal uudit function 5.

aud it to be established in GoS based on a plan to be adopted for staffing, mandate, and audit plans to focus on systemic issues.

Transparency in budget Measures transparency and legislative oversight through the 6. formulation, allocation budget cycle. and execution

7. Procurement Measures the increased capacity of the procurement staff. professionals certified

Quarterly departmental

8. development plan Measures monitoring capacity of P&DD with focus on the B11nk monitoring reports portfolio. prepared and published.

l'agc 11 of 19

,,. Govcrnrnenl of Sindh Finance Dcpartmcnl

(Economic Rcfo1111 Unil)

SINOH PUBLIC SECTOR MANAGEMENT REFORM PROJECT Finance Departmenl, Government ofSindh

IDA Credi t No. 55840-PK. 11. ELIGIBLE EXPENDITURE PROGRAMS

The delni ls or Eligible E~penditure Programs (EEPs) are as follow:

Department Budget Grant Object Code & Function Code

Function No. De.,criptfon Dcscriution

011204 Administration of Financial Affairs,

Finance AO I 011205 TOJ< Managcrncnt

(including Simlh Employees Related (Customs, Income

SC2 1003 Tax, Excise}, Revenue Board) Expenses 011206 Accounting

Services, 011207 Auditing Services

Plaiming & AO\ 01520 1 Planning. Development

SC21008 Employees Related 015220 Other (including Expenses 093103 Administration SPPRA)

Excise & AOI Tax Managerncnl

Taxation SC2 1005 Employees Related 01 1205 (Customs, Income Expenses Tax, Excise)

Board or AOI Tax Management

Revenue SC21004 Employees Related 011205 (Custom. Income Expenses Tux, Excise)

Pagc 1Jofl9

Govermm:nt of Sindh Finance Department

(Cconomic Reform Unit)

SfNOH PUBLIC SECTOR MANAGEME1'T REFORM PROJECT f:inance Department, Government of Sindh

IDA Credit No. 55840-PK.

12. DISBURSEMENT CONDITIONS ANO SCllEDULit

The disbursements fpr Component I ·of the Project are conditional on the achievement of 8 Disbursement Linked Indicators (DLls) related to Finance Depanment (including Sindh Revenue Doard), Planning & Development Department (including Sindh Public Procurement Regulatory Authority) , Excise, Tax.ation & Narc.:>tics Control Dcpa11ment, and 13onrd of Revenue. In each cycle, the amount el igi ble for disbursement wil l be the product of the \Cltal number of achieved DLls and the unit DLI price. Where achievement of a DI.I cam10t be certified, an amount equivalent to the unit DLI price will be withheld. This amoum will be paid at any later date when such achievement can be verified. In case of p;1r1ia lly met DI.I, a proportion or that DI.I would be considered met and remaining would be cnrried forwnrd. The reimbursement depends on the two fac1ors, first lhe achievement of DLI and second is the EEPs.

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,, Government of Sindh Finance Dcprutrncnl

(Economic Refom1 Unit)

S!NDH PUBLIC SECTOR MANAGEMENT REFORM PROJECT Finance Department, Govcmmcnl ofSindh

!DA Credit No. 55840-PK.

13. SPSMRP COST AND FINANCING/LOAN BY IDA AND EUROPEAN COMM ISSION

UQ.<t "11 Mill inn\

Financial Components Percentage(%)

Sindh Government 220 78%

IDA 50 18%

European Commission (l'cclmical Grant)* 12 4%

Total ('282') 100•1.

• European Commission (EC) is n non-monetary technical grnnt and docs not involve any fmancial transfers.

U<;i'I: "II I\ illion\

Allocation of Lonn Amount (Category) Amount ofl.,111111 Pcrc.cnta11c (%)

Eligible Expenditure Programs $40 80%

Tcchn.ico.l Assislrlllcc SIO 20%

Total $50 100%

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Govemment of Sindh Finance Department

(Economic Rcfoim Unit)

SINDH PUBLIC SECTOR MANAGEMENT REFORM PROJECT Finance Department, Government of Sindh

IDA Credit No. 55840-PK.

13.1 DLI Cost per Year

(USS In Millions)

FY FY FY FY FY S. No DLI 2014· 2015· 2016- 2017- 2018· TOTAL

JS 16 17 18 19

Approval and initial implementation of ). Sindh Tax Revenue Mobilization 10 10

Refonn Plan

2. Enhanced SRB human resources 2 o.s l 1 o.s 5

capacity for administration

3. Increased automation of SRB 2 o.s I 0.5 o.s 4.5

4. Risk based audits of taxpayers l l I o.s 0.5 ..

implemented

5. Establishment of Internal Audit 2 I 0.5 I o.s s

6. Transparency in budget formulation,

I l o.s I o.s 4 allocation and execution.

7. Procurement professional certified I 1 o.s 0.S I .. Quarterly departmental development

8. plan monitoring reports prepared and I 1 o.s o.s o.s 3.5

' published

TOTAL 20 6 s s 4 40

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Government of Sindh Finance Department

(Economic Reform Unit)

SINDH PUBLIC SECTOR MANAGEMENT REFORM PROJ ECT Finance Dcpnrtmcnt, Government of Sindh

IDA Credit No. 55840-PK. 14. RECEIPT

The 0 1110 111.ll of linuncing as the GoS has nrrivcd at during the current financial year ended June 30'h2016 is as follows:

20 14-15 2015-1 6 Cumulative

PKR ( In Mi ll ions) PKR ((n Mill ions) PKR ( In Millions)

Finnncc by World 1,255 703 1958 13nnk

Finance by 1,778 2837 4615 Government of Sindh

Toh1I Finnncir1g 3,033 3540 6573

14.1 The share of Government of Sindh is nrrived at after summing nl l the expenditure incurred and then deduct ing from the funds received fro111 IDA.

14.2 TA Financing of PKR 158 Million was received from IDA during the reporting linancial year and is included in Finance by World Ba11k.

15. WITHDRAWAL SCIIEOlJLE OF IDA

Aoolicd Sanctioned Withdrnwnl Application /\mount Amount in Amount in Amount in Applicntlon Date in U.S$ PKR

Date USS PKR

Stal us Type

Nu. Amount in Millions

I-··--·-·- · -SPSMRl'-11

Advunce for TA 158 Pnid Conwoncnt

. . . - . f--·

22·~ Reimbursement 27"'Ju Sf'SMl<P-111 of eligible J unc 7.6 793 ne 5.2 545 Paid

expendi ture 20 16 20 16 ------L Totul 703 l'aic.l

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Government of Sindh f'innncc Depnrtmem

(Economic Reform Unit)

SINDH PUOLIC SECTOR MANAGEMENT REF'ORM PROJECT Finance Department, Government ofSindh

lDA Credit No. 55840-PK.

16. Eligible Expendllure Program Oet11iL,

Anrnun t in MiUi91J11

l'orticulars Actual Expenditures

Finance (including SRB) 954

Planning & Development 300

(including SPPRA)

Excise & Taxntion 1,122

Board of Revenue 1,010

Torn I 3,386

17. INCREASF'./ (DECREAST~) IN CASH

Amount in Million Amount In MiUlon

Year 2015-2016 2014-2015

Toial Receints 3.540 3,033

Total Exoenditurcs 3.386 3,033

lncreusc/ (Decrense) in Cash 154 Nil

Page IRofl'J

I I

Government of Sindh Finance Department

(Economic Reform Unit)

SINDH PUBLIC SECTOR MANAGEMENT REFORM PROJECT Finance Department, Government ofSindh

JOA Credit No. 55840-PK.

18. EXPENDITURES TRACKING AND MONITORING

The expenditure shall be tracked and monitored by the requiring the stakeholders to send periodic reports. Such information shall be incorporated and updated in the project plans and in the bi­annual Interim Financial Reports (IFRs) for proper recording and audit.

19. AUTHORIZATION FOR ISSUE

These financial statements have been authorized for issue on 3011, June 2016.

20. GENERAL

(i) Level of Precision

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