PROJECT MANAGEMENT UNIT€¦ · I PROJECT MANAGEMENT UNIT VINH PHUC FLOOD RISK AND WATER MANAGEMENT PROJECT Credit Number 8614 -VN ... CPA Registered No.: 0744-2018-002-1 CPA Registered

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VINH PHUC FOREIGN CONCESSIONAL LOANSPROJECT MANAGEMENT UNIT

I VINH PHUC FLOOD RISK AND WATER MANAGEMENT PROJECTCredit Number 8614 - VN

AUDITED FINANCIAL STATEMENTSFor the period from 25 September 2017 to 31 December 2018

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IVinh Phuc Flood Risk and Water Management ProjectI Credit Number 8614 - VN

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CONTENTS Page

PART I INDEPENDENT AUDITORS' REPORT ONTHE FINANCIAL STATEMENTS

Report of the Project Management Unit 3

Independent Auditors' Report on the Financial statements 4-5

Audited Financial statements

Statement of Funds and Expenditures 6

Statement of Funds balance 7

Statement of Designated accounts 8

Statement of Withdrawals and reconciliation of funds 9

Notes to the Financial statements 10-13

PART II INDEPENDENT AUDITORS' REPORT ON 14-15

THE INTERNAL CONTROL SYSTEM

PART III INDEPENDENT AUDITORS' REPORT ON 16-17

THE COMPLIANCE

PART IV MANAGEMENT LETTER 18-20

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IVinh Phuc Flood Risk and Water Management ProjectCredit Number 8614 - VN

REPORT OF THE PROJECT MANAGEMENT UNIT

Vinh Phuc Foreign Concessional Loans Project Management Unit ("Project Management Unit")presents this report and the Financial Statements of the Vinh Phuc Flood Risk and Water ManagementProject ("the Project") for the period from 25 September 2017 to 31 December 2018.

The Project

The Project is implemented under the Credit Number 8614 - VN dated 31 March 2017 ("theAgreement") between the Government of the Socialist Republic of Vietnam and the World Bank.

1 The Project Management Unit

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

Mr. Nguyen Duc Tai Head of the PMUMr. Ho Quang Phuc Deputy DirectorMrs. Nguyen Thi Thu Trang Accountant in chargeMrs. Khong Thi Mai Huong General Administrator in charge

Auditors

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

Responsibilities of the Project Management Unit

The Project Management Unit is responsible for preparing the project financial statements, includingStatement of Funds and Expenditures, Statement of Funds balance, Statement of DesignatedAccounts and Statement of Withdrawals and reconciliation of funds, which comply with the accountingpolicies described in the attached Notes to the Financial Statements. The Project Management Unitassures that the accounting policies are appropriately selected and consistently applied.

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

The Project Management Unit is also responsible for maintaining an effective internal control asmanagement determines necessary to enable the preparation of financial statements that are freefrom material misstatement, whether due to fraud or error, and comply with relevant laws, regulationsand other provisions of the funding agreement that could have a direct and material financial effect onthe Project financial statements.

On behalf of the Project Management Unit

Nguyen,Duc TaiHead of the PMU

Vinh Phuc, 31 May 2019

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No.: 310519.002/BCTC.FIS2

I INDEPENDENT AUDITORS' REPORTS ON THE FINANCIAL STATEMENTS

3 To: Vinh Phuc Foreign Concessional Loans Project Management Unit

Opinion

We have audited the accompanying financial statements of the Vinh Phuc Flood Risk and WaterI Management Project ("the Project") which comprise Statement of Funds balance as at 31/12/2018,Statement of Funds and Expenditures, Statement of Designated Accounts, Statement ofWithdrawals and reconciliation of funds and Notes to the Financial Statements for the period thenended, and Notes to the Financial Statements, including a summary of significant accountingpolicies.

In our opinion:

The accompanying financial statements give a true and fair view of the financial position of theProject, including the balance of the Designated Account as at 31 December 2018, fundsreceived and expenditures incurred, movements of the Designated Account for the period thenended in accordance with the basis of the principal accounting policies described in the Notesto the Financial Statements and the provisions of the Credit Number 8614 - VN;

In addition, with respect to Statements of Expenditure, adequate supporting documents havebeen fully maintained to support to the replenishment requests submitted to the World Bank.The expenditures are eligible and in right purposes of the Credit Number 8614 - VN.

I Basis of Opinion

We conducted our audit in accordance with International Standards on Auditing ("ISAs"). Ourresponsibilities under those standards are further described in the Auditors' Responsibilities for theAudit of the Financial Statements section of our report. We are independent of Project ManagementUnit in accordance with the international Ethics Standards Board for Accountants' Code of Ethicsfor Professional Accountants ("IESBA Code"), and we have fulfilled our other ethical responsibilitiesin accordance with the IESBA Code. We believe that the audit evidence we have obtained issufficient and appropriate to provide a basis for our opinion.

Responsibilities of Management for the Financial Statements

The Project Management Unit is responsible for the preparation of the financial statements inaccordance 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 offinancial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Project's abilityto continue as a going concern, disclosing, as applicable, matters relating to going concern andusing the going concern basis of accounting unless management either intends to ceaseoperations, or has no realistic alternative but to do so.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as awhole are free from material misstatement, whether due to fraud or error, and to issue an auditor'sreport 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 materialmisstatement when it exists. Misstatements can arise from fraud or error and are considered

A member of International

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material if, individually or in the aggregate, they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these financial statements

As part of an audit in accordance with ISAs, we exercise professional judgment and maintainprofessional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the financial statements, whether 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 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 theaudit evidence obtained up to the date of our auditors' report. However, future events orconditions may cause the Project to cease to continue as a going concern;

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

We communicate with the Project Management Unit regarding, among other matters, the plannedscope and timing of the audit and significant audit findings, including any significant deficiencies ininternal control that we identify during our audit.

AASC Limited

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

Hanoi, 31 May 2019

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IVinh Phuc Flood Risk and Water Management Project Financial StatementsCredit Number 8614 - VN Period ended 31 December 2018

STATEMENT OF FUNDS AND EXPENDITURESFor the period from 25 September 2017 to 31 December 2018

AccumulatedNote to 31/12/2018

VNDI. Funds1 Funds received from the World Bank 3 133,984,873,618

2 Counterpart funds of Vietnam Government 55,247,235,341

3 Exchange rate differences 701,277,395189,933,386,354

II. Expenditures 41 Goods, Consultants' services, Non-consulting services, 50,178,356,741

Training and Workshops2 Front-end Fee 8,415,750,000

3 Commitment Charge 12,699,123,618

4 Incremental operating costs 2,600,000,000

5 Others 417,406,00074,310,636,359

Ill. Surplus 115,622,749,995

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STATEMENT OF FUNDS BALANCEAs at 31 December 2018

3 Note 31/12/2018VND

CURRENT ASSETS 117,494,632,543

Cash at bank 5 90,055,791,543Advances to contractors 6 27,438,841,000

NON-CURRENT ASSETS 74,310,636,359

Project Implementation Expenditures 4 74,310,636,359

TOTAL ASSETS 191,805,268,902

CURRENT LIABILITIES 1,871,882,548

Payables to contractors 7 1,871,812,950

Other payables 69,598

FUNDS 189,933,386,354

Project Implememtation Funds 189,232,108,959- Funds received from the World Bank 3 133,984,873,618

- Counterpart funds of Vietnam Government 55,247,235,341Foreign exchange differences 701,277,395

3 TOTAL RESOURCES 191,805,268,902

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STATEMENT OF DESIGNATED ACCOUNT

For the period: from 25/09/2017 to 31/12/2018Account holder Vinh Phuc Foreign Concessional Loans Project Management UnitAccount No: 0515196666699Bank: Military Commercial Joint Stock Bank - Dien Bien Phu BranchAddress No. 28A, Dien Bien Phu Street, Ba Dinh, HanoiCredit No.: 8614-VN

PART A: ACTIVITIES Note USD USD

Opening balance

Add: Amounts deposited by the World Bank 5,000,000.00

Deduct: Amounts withdrawn (1,015,055.00)

3 Closing balance 3,984,945.00

PART B: RECONCILIATION

1 1. Amount advanced by the World Bank 5,000,000.00

2. Present outstanding amount advanced to 5,000,000.00

3. Closing balance 3,984,945.00

4. Add:- Amounts withdrawn and not yet claimed 1,015,054.42

- Payment adjustment 0.58

1,015,055.00

5. Total advances accounted for 5,000,000.00

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STATEMENT OF WITHDRAWALS AND RECONCILIATION OF FUNDSU Credit Number 8614 - VNFor the period from 25 September 2017 to 31 December 2018

Withdrawal applications Amount claimed Amount received

No. Date Currency Advance Total Date Amount Variances Note

(a) (b) (b-a)

Designated account

01/WB/2018 06/06/2018 USD 5,000,000.00 5,000,000.00 22/06/2018 5,000,000.00

3 Total amounts 5,000,000.00 5,000,000.00 5,000,000.00

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NOTES TO THE FINANCIAL STATEMENTSFor the period from 25 September 2017 to 31 December 2018

1. Background

The Vinh Phuc Flood Risk and Water Management Project is implemented under the CreditNumber 8614 - VN dated 31 March 2017 (the "Agreement") between the Government of theI Socialist Republic of Vietnam and the World Bank.

The main objective of the Project is to strengthen flood risk management capacity and improvewastewater management in the central catchment of Vinh Phuc Province. The Project consists ofthe following parts:

Part 1: Flood Risk Management

Part 2: Water Enviroment Management

Part 3: Implementation Support, Technical Assistance and Institutional Strengthening

The Project officially came into operation since 25 September 2017 and is expected to close on31 December 2021.

The Project is managed by Vinh Phuc Foreign Concessional Loans Project Management Unit,and its office is located at No 38 Nguyen Trai Street, Dong Da Ward, Vinh Yen City, Vinh Phuc,Vietnam.

2. Principal Accounting Policies

a. Basis of preparation of the Financial Statements

The annual accounting period commences from 1st January and ends at 3 1st December.The first accounting period from 25 September 2017 to 31 December 2018.

The financial statements are prepared in accordance with the requirements of the World Bankand presented in Vietnam Dong (VND), except for the Statement of Designated Accounts andStatement of Withdrawals, which are prepared in United State Dollar (USD).

The principal accounting policies are summarized as below:

b. Foreign currencies

Funds received from the World Bank in the foreign currencies are translated into VND using theexchange rates announced by the Ministry of Finance at the date of receiving the funds or at thedate of direct payment made to contractors/suppliers.

Transactions in foreign currencies are translated to VND under actual exchange rates of theserving bank on their transaction dates. All exchange differences from these transactions arerecorded as "Exchange rate differences" account and presented as "Exchange rate differences"on the Statement of Funds and Expenditures.

c. Funds and Expenditures

I Funds

Funds received from the World Bank are recorded when remittance made into Designated

Accounts or direct payment made to contractors/suppliers;

Counterpart funds of the Vietnamese Government are recorded when payments are made

directly from the Vietnamese Government to contractors/suppliers of the Project or funds are

remitted to PMU for settlement of the Project's activities.

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I Expenditures

Expenditures are recorded when they are actually incurred, except for incremental operatingcosts which are allocated from general incremental operating costs of Vinh Phuc ForeignConcessional Loans Project Management Unit according to the capital ratio plan approved forthe year.

d. Designated account

1 Designated Account is the deposit account in USD opened at Military Commercial Joint StockBank - Dien Bien Phu Branch for the Project's activities. Payments made via DesignatedAccounts are for eligible expenditures of the Project in accordance with the provisions of theCredit Number 8614 - VN.

3. Funds received from the World Bank

Accumulated to 31/12/2018USD Equivalent to VND

Credit Number 8614 - VNDesignated account 5,000,000.00 112,870,000,000Advance 5,000,000.00 112,870,000,000

Capitalization of interest and commitment charges 562,987.80 12,699,123,618

Front-end Fee 375,000.00 8,415,750,000

133,984,873,618

I 4. Expenditures

Accumulated to 31/12/2018Counterpart

The World Bank fund (*) TotalVND VND VND

Goods, Consultants' services, 292,100,600 49,886,256,141 50,178,356,741Non-consulting services,Training and Workshops

Commitment Charge 12,699,123,618 - 12,699,123,618Front-end Fee 8,415,750,000 - 8,415,750,000Incremental operating costs - 2,600,000,000 2,600,000,000Others - 417,406,000 417,406,000

21,406,974,218 52,903,662,141 74,310,636,359

(*) Including VND 39,945,393,300 financed by the counterpart fund arising before the effectivedate of the Agreement.

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Expenditure items are financed as the Credit Number 8614 - VN as follows:

Amount of the LoanAllocated (USD) Funded rate (%)

Works 91,324,000 85% ()

Goods, Consultants' services, Non- 49,221,000 100% ()

consulting services, Training and WorkshopsFront-end Fee 375,000 100%

Commitment Charge 1,200,000 100%

Interest on the Loan accrued on or before 7,880,000 100%the last Payment date immediately precedingthe Closing Date.

Interest Rate Cap or Interest Rate Collar - 100%

premium150,000,000

(*) Inclusive of local taxes

5. Cash at bank

31/12/2018VND

Designated account 89,956,161,947Current account (VND) 99,629,596

90,055,791,543

3 6. Advances to contractors

31/12/2018VND

Phuong Nam MCS 23,435,150,000Hydraulic, hydropower Construction and Investment Consultants JSC 2,412,971,000

Construction and Development Consultants Hoang Thinh Vinh Phuc JSC 1,590,720,000

27,438,841,000

1 7. Payables to contractors

31/12/2018VND

Centre for subtainable community development 809,655,000

Construction and Development Consultants JSC 586,034,000Vinh Phuc institute of Construction planning 142,893,400Construction quality inspection center 125,506,000Others 207,724,550

1,871,812,950

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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. Approval of the Financial Statements

I The financial statements were approved by Project Management Unit for issuance on 31 May 2019.

Nguyen Duc Tai Nguyen Thi Thu TrangHead of the PMU Accountant in charge

Hanoi, 31 May 2019

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,aasc

No.: 310519.002/BCTC.FIS2

INDEPENDENT AUDITORS' REPORT ON THE INTERNAL CONTROL SYSTEM

To: Vinh Phuc Foreign Concessional Loans Project Management UnitVinh Phuc Flood Risk and Water Management Project

We have audited, in accordance with International Standards on Auditing, the financial statementsof the Vinh Phuc Flood Risk and Water Management Project ("the Project") for the period from 25September 2017 to 31 December 2018 and issued the auditors report thereon dated 31 May 2019expressing an opinion on those financial statements.

In connection with our audit of the financial statements, we also examined the effectiveness ofinternal control over compliance with requirements that could have a direct and material financialeffect on the financial statements as well as the internal control over financial reporting for the periodfrom 25 September 2017 to 31 December 2018.


The 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.

1 Auditor's Responsibility

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

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

Our examination included obtaining an understanding, testing, and evaluating the design and operatingeffectiveness of the internal control, and performing other procedures as we considered necessary in thecircumstances to obtain sufficient appropriate evidence to provide a basis for our opinion.

Because of the inherent limitations of internal control over financial reporting, including thepossibility of collusion or improper management override of controls, material misstatements due toerror or fraud may occur and not to be prevented or detected on a regular basis. In addition,projections of any evaluation of the effectiveness of the internal control over financial reporting tofuture periods are subject to the risk that controls may become inadequate because of changes inconditions, or that the degree 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 period from 25September 2017 to 31 December 2018.

AASC Limited

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Dolulanlh Cuong Nguyen Pham Hu gDeputy General Director Auditor in-chargeCPA Registered No.: 0744-2018-002-1 CPA Registered No.: 2893-2015-002-1

Hanoi, 31 May 2019

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aascNo.: 310519.002/BCTC.FIS2

INDEPENDENT AUDITORS' REPORT ON THE COMPLIANCE

To: Vinh Phuc Foreign Concessional Loans Project Management UnitVinh Phuc Flood Risk and Water Management Project

We have audited, in accordance with the International Standards on Auditing, the financialstatements of the Vinh Phuc Flood Risk and Water Management Project ("the Project") for theperiod from 25 September 2017 to 31 December 2018 and issued the auditors report thereon datedon 31 May 2019 expressing an opinion on those financial statements.

In connection with the audit of the financial statements, we also performed procedures on theProject's compliance with the Credit Number 8614 - VN dated 31 March 2017, law and regulationsthat have a direct and material effect on the Project's financial statements for the period from 25September 2017 to 31 December 2018 ("the Requirements").


The Project Management Unit is responsible for complying with the Requirements applicable tothe 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.

I 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 planand perform our procedures to obtain reasonable assurance about whether, in all material respects,the Project has complied with the Requirements.

An assurance engagement to report on the compliance with the Requirements at the Projectinvolves performing procedures to obtain evidence about whether the Project's activities are free ofmaterial non-compliance with the Requirements, including obtaining an understanding of the internalcontrol relevant to the Project's compliance with the Requirements. The procedures selecteddepend on the auditors' judgment, including the assessment of risks that the Project does not

comply with the Requirements and whether such non-compliance could have a direct and materialfinancial effect on the Project's financial statements. Our procedures included testing thecompliance with the Requirements we consider necessary to provide a reasonable assurance thatthe Requirements are complied by the Project.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basisI for 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 period from 25 September 2017 to 31December 2018.

AASC Limited

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Do 11 nh C uon g Nguyen Pham HungDeputy General Director Auditor in-charge

CPA Registered No.: 0744-2018-002-1 CPA Registered No.: 2893-2015-002-1

Hanoi, 31 May 2019

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Documents

PROJECT MANAGEMENT UNIT€¦ · I PROJECT MANAGEMENT UNIT VINH PHUC FLOOD RISK AND WATER MANAGEMENT PROJECT Credit Number 8614 -VN ... CPA Registered No.: 0744-2018-002-1 CPA Registered