Office of the

Auditor-General of Pakistan Special Sector Audit Wing

Constitution Avenue

Islamabad

No.PNFAP/Sindh/SSAIF- 14/;lc I

To, I. The Secretary

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

/ Jl· The Country Director, World Bank, Resident Mission

20A, Shahrah-e-Jamhuriat

G-5/1, Islamabad

Dated: 30 -12-2016

Subject:- FOREIGN AIDED PROJECTS {FAPs) AUDIT REPORTS

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

this office:

S.No Name of Projects Name of Development Partners

I. Sindb Water Sector Improvement Project WB

2. Sindb Global Partnership for Education WB

3 >/ Sindh Barrages Improvement Phase-I Project WB

4. Sindb Public Sector Management Reform Project WB

5. 2"" Sindh Education Sector Reform Program WB

6. Sindb Irrigated Agriculture Productivity Enhancement WB

Project

7. Enhanced Nutrition for Mothers and Children WB

8. Sindh Agriculture Growth Project (Agriculture) WB

9. Sindh Agriculture Growth Project (Livestock) WB

10. Sindh Skills Development Project (BBSYDP) WB

I I. Sindh Skills Development Project (STEVTA) WB

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Financial Attest Audit Report on the

Accounts of the Sindh Barrages Improvement Project,

for the Financial Year 2015-2016,

World Bank-assisted,

Loan No.5684

Auditor-General of Pakistan

TABLE OF CONTENTS

Page No.

Preface List of Abbreviations

PART-I

Project Overview 01

Auditor's report to the Management (Audit Opinion) (»_

Financial Statements 03

PART - II

COVERING LETTER TO THE MANAGEMENT LETTER MANAGEMENT LETTER 11

EXECUTIVE SUMMARY 12

I. INTRODUCTION 13

2. AUDIT OBJECTIVES 15

3. AUDIT SCOPE AND METHODOLOGY 15 • 4. AUDIT FINDINGS AND RECOMMEND A TIO NS 16

4.1 Organization and Management 16

4.2 Financial management 16

4.3 Procurement and Contract Management 16

4.4 Construction and Works 17

4.5 Assets Management 17

4.6 Monitoring and Evaluation 17

4.7 Compliance with Grant I Loan covenants 19

4.8 Environment 19

4.9 Sustainability 19

4.10 Overall Assessment 19

5. CONCLUSION 20

ACKNOWLEDGEMENT 21

ANNEX UR.ES 22

•

•

PREFACE

The Auditor-General conducts audits subj ect to Article 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 and Terms and Conditions of Service) Ordinance 200 1.

The Directorate General Audit Sindh conducted audit of the Sindh Barrages Improvement Phase-I Project during October 20 16 for the period OJ" July 2015 to 30'h June 2016 with a view to reporting

significant findings to stakeholders. A udi t examined the economy, effic iency and effectiveness

aspects of the Sindh Barrages Improvement Phase-I Project. In addition, Audit assessed, on test check

basis, whether the management complied with appl icable laws, rules, and regu lations in managing the

Sindh Barrages Improvement Phase-I Proj ect. -n,e Aud it Report indicates specific. actions that. if

taken, will help the management to realize the objectives of the Sindh Barrages Improvement Phase-I

Project. The observations inc luded in th is report have been finalized in the light of discussions in the Exit meeting.

The Audit Report consists of two parts. Part-I contains A uditor's Report (Audit Opinion) and Financial Statements. Part-II contains Executive Summary, Management Letter and Audit Findings.

The Audit Report is submitted lo the International Development Association (IDA) in terms of Grant

Agreement between International Development Association & Islamic Republ ic of Pakistan.

Dated: 29-1 2-2016 Place: Karachi

(AZ ~ EED) DIRE~:~ERAL

2

• BMO

ESMP

ECNEC

GoS

GDP

IDA

INTOSAI

PC-I

POE

SBIP

SST

•

ABBREVIATIONS & ACRONYMS

Barrages Management Organization

Environmental and Social Management Plan

Executive Committee of the National Economic Council

Government of Sindh

Gross Domestic Product

International Development Association

International Organization of Supreme Audit Institutions

Planning Commission Proforma- I

Panel of Experts

Sindh Barrages Improvement Project

Sindh Sales Tax

. .,,

•

•

I . I

i .I ,,

PART-I

Project Overview

Auditor's report to the Management (Audit Opinion)

Financial Statements

I

Priojcct Overview

• Project Title I Sindh Barrages improvement Project

Sponsoring Authorities World Bank and Govt. ofSindh

Borrower irrigation Department GOS

Executing Agency I

I irrigation Department

IDA Load No I 5684 Pak

Implementing Agency l Project Management Office, Irrigation

' Department GoS

PC-! Cost (Program) 21,241.000 Million

Date of Loan Signing 26 August 2015

Date of Loan Effectiveness 11 lh November 2015

I Loan Closing Date 22 December 2020

Date of approval from ECNEC 13 May 2015

Loan Utilization status in FY 2015-16 190.861 Million

f

Loan Utilization upto Last.FY 2015-16 I 190.861 Million

-

1

'

Auditor's Report on the Sindh Barrages Improvement Phase-I Project Financial Statements

We have audited the accompanying financia l statements ofSindh Barrages Improvement Phase-I Project, Karachi, Loan Agreement No.lDA5684-PK, that comprise of Statement of Receipts & Payments, Statements of Comparison of Budget &Actual together with the notes forming part thereof for the year ended June 30, 2016.

Management Responsibility It is the responsibility of project management to establ ish and maintain a system of internal control and prepare and present the Statement of Receipt and Payment in conformity with the requirements of Cash Basis IPSAS, Financial Reporting under the Cash Basis of Accounting Standard.

Auditor's Responsibility The responsibi lity of the auditor is to express an opinion on the financial statements based on the audit conducted. We conducted our audit in accordance with International Standards of Supreme Audit Institutions. Those standards requ ire 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 eva luati ng the overall statement presentation. We believe that our audit provides a reasonable basis for our opinion.

Opinion In our opinion:

a) The financ ial statements present fairly, in all material respects. the cash receipts and payments by the project for the year ended JO'h 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: 29-12-20 16

Place: Karachi

(AZH~:::0) DIREC~ENER<\L

,

•

·r :,, , .. ·' •,:

:':'

f,: Sindh Barrages lmprovem ent Project 684 PAK J Credit Accoun t No. IDA- 5

.'.: Consolidated Statement of Cash R For the Year ended June

cceipl & Payment

30,2016

' ~

iECEIPTS

venunent Funds (Gos)

A Funds (the World Bank) tal Receipts

[ ·

,\'MENTS (by components)

,Rehabilitation of Guddu Barrage

Improved Barrage Operation

i Project Management and Monitor ing and ta] Payments

osing Balance

. r Designated Account

Lsh at the beginning of the Year rease/Decrease in Cash hat the end of the year

!MANAGER FINANCE Projtct Management Office

I · . .. , :1/ . : .,. -1 yfij~ ~ '~1 'j "'' .t•:\·f . t': '

'.:f~\it•,'fl,,1~t,;.~ ' , , '. ~. ' - '

8.1 178,425,4 I 3 8.2 8.3 12,435,720

190,861,133

100, 720,353

291,581,486

190,861, 133

9 100,720,353

I ,704,867

-118,824

1,823,691

962,390

2,786,08 1

1,823,69 1

962,390

Page 1

,

•

Sindh Barrages Improvement Project Credit Account No. IDA- 5684 PAK

Statements of Comparison of Budget and Actual Account For the Year ended .June 30, 2016

CEIPTS vemment Funds (Gos) A Funds (the World Bank) ta! Receipts

I YMENTS (by components) Rehabilitation of Guddu Barrage

Improved Barrage Operation

! Project Management and Monitoring and Eval uation I lnl Payments

ANAGER FINANCE PrCI!':'( ~ !.~rr,.1., t1•11ont (l ffi(~

;

8.1 I 80,806,563 8.2 19,047,483 8.3 91,727,435

29 1,581,481

Page 2

I 78,425,41 3

12,435,720 I 90,861,133

•

. .

r :f f

Reporting Entity

Sindh Barrages Improvement Project Credit Account No. IDA- 5684 PAK

Statements of Cash Receipts and Payments For the Year ended .June 30, 2015

The Financial Statements are for Sindh Barrages Improvement. Project. The financial statement encompasses the reporting entity as defined in the financing agreement between the Islamic Republic of Pakistan and the World Bank. The Financing Agreement was signed November 2015 for amount SDR Million Equivalents to US$ 208 Million. The Project became effective from May-2015 with the closing date of December 2020.

Project Development Objectives:

Prolong life of barrage structure & efficient operation of barrage through modernization of infrastructure. Assure Un-interrupted supply of water to 2.6 MA of land falling in Jacobabad, Ghotki, Shikarpur & Sukkur Districts of Sindh and Jafarabad & Nasirabad Districts of Baluchistan. Improve efficiency of barrage off-taking structures. Improve river approach condition & sediment management for attaining designed discharge & Minimize flood risk to barrage & other structures. Improve command area by controll ing effects of salinity through improved, uninterrupted diversion of water.

i Main components of the project:

I A. Rehabilitation of Guddu Barrage.

C. Project Management and Monitoring and Evaluation. t

B. Improved Barrage Operation.

·ief Description of these components is as under:

f l1 Component A: Rehabilitation of G11dd11 Barrage (US$J 95.00 Million):

This component will support rehabilitation of the barrage and its associated structures. The works have been determined based on (a) a detai led diagnostic assessment, (b) hydrological and sediment analysis studies including physical and numerical model studies, and (c) geotechnical, structural and t safety evaluation studies the component wi ll finance.

a) Gate replacement works lo improve the regulation and the flow of the barrage. This includes replacing all 65 rnain-barrage . .steel gatcs.25 main.canal head regulator gates (the gates are 7.3 m wide and 3.8 m high, and weigh 25 tons each), and hoist gear including all mechanical, electrical equipment. It also includes providing new standby generators, electrical cabling and switch gears,

Page 3

ANAGER FINAN'CE Project Mana9rmrntOffice

replacement of barrage lighting, repair to barrage li fting bridge and safety barriers, and .- rehabilitation of the three main canal head regulators.

b) Concrete repairs along the upstream gate grooves and rehab ilitation of both fish ladders. I

c) Removal of the left pocket divide wall and construction of new left pocket divided wall.

d) River train ing works through construction of a left bank spur to promote favorable river approaches conditions to the barrage and strengthen the upstream existing river training works.

e) Staff offices for the O&M staff at the Guddu Barrage including laboratory, resi<lential, buildings, dispensary, mosque, recreational facil it ies, access roads, and all supporting service infrastructure.

f) Implementation of environmental and social plan

g) Consulting services for construction supervision, quality cont~ol, and construction management support

1 Component B: Improved Barrage Operation (US$6.00 1l1illio11): This component will support the establishment of the BMO and modernization and improvements to the barrage O&M. Ins ti tutionally this will include undertaking a study to design the BMO structure, defining roles and responsibi lities, and moving towards a more service oriented culture. Technically the Bank wi ll finance necessary upgrades to the monitoring instrumentation, such as piezometers, gate positioning and water measurement equipment, replacement of survei]!ance and maintenance boats, and procurement of hydro graphic equipment. The project will support }vorkshops and provide a stock of spare parts, for use in maintenance activiti es. The instrument monitoring system for the barrage wi ll be renovated, and the operations staff will be equi pped with an updated operation, maintenance, and surveillance manual.

Component C: Project Management and Monitoring and Evaluation (USS7.00 Million): This component will support the coordination of all project re lated activities as well as training and technical assistance in procurement, financial , social and environmental safeguards, and communication. Activities will include the establishment of an inde:)endent POE to review, moni tor, evaluate, and help guide the rehabilitation process wi th regard to safety of the barrage.

uthorities responsible for:

Sponsoring

Execution

N GER FINANCE Proif<t Ma~a9,men1 Office

J> Irrigation & Power Department, Government of Sindh. > World Bank.

J> Irri gation & Power Department GoSindh,

)> Project Management Office, Karachi

J> Office of the Chief Engineer Guddu Barrage Irrigation Deptt:

J> Irrigation & Power Department GoSindh

J> Office of the Chief Engineer Guddu Barrage Irrigation Deptt:

Page 4

Project Finances

a) Credit by IDA:

A Credit of US$ 208 million was negotiated with the World Bank with an execution effective on November 11 , 20 15 after signing an agreement between the Islamic Republic of Pakistan and In ternational Development Association (IDA).

b) Counterpart Funds (GoS):

The Government of Sindh (GoS) will provide 20 million as counterpart funds during project implementation.

c) Finances by Category:

' ·,

Categ9ry Descti'pt!Ol}Ji:,,;,; .. \. . , ·, . "

:~,, !, }'1;.\ .. ;;.' ; ' ·. ;

. . . ) .·' , ... '. . A Rehabilitation of Guddu Barrage

B improved Barrage Operation

c Project Management, Monitoring, and Evaluation.

Total

Project Life

i)

ii)

iii)

iv)

v)

Project Implementation Period:

e,e,.J..,-'.\ppro va l'Da(e

Credit Agrcement.,Dala'

Crcd i, E ffcct i vcncss..Dalc:

C"lo}in~itle:

.~ . ·:· ',"' ':l..-:'~ 1,..i';, "!:ii 11~···tt~1?1'_"'~-<.f -.,. '•I. 'i . ' ~ 'i: .• (. ',·.. . % ofF.itia'ncing\~Yf.;, ;.ii~~S}Miljion);'. ' .. • ~(,; .,t.,t' •.• .,,., ·~-·-·

. Category:,. '., ,,· ;,t;.J..-r,}.1-1~\.:;~p:.1;: «_ 1 •'t f..: , .;;.~. ;Jf-t.-:·,,~-1.!n,,,,_t, •· '·r"~{l;·i, i·:·\

,: IDA:(o/6)\1 ,1 Gij${(<o/o)t ,··1-nr -.. · "a·· '-'': ~ -·,'., , oS 90 10 175.00 20 JOO 6.00

100 0 7.00

f.-)188 -~· , .. 20.0·

Oi,.Ycars

1ay....2QL5

t2.91h Augi,g;t 2015

l:iovcrnbcr I L fQ L5'

Dcccrnb_er 22, 2020.

I CcrtificatioJJ by Project Management on Application of Fund

Project Management Office of each component certifies that the funds have been applied/ expenditure has been incurred for the purposes intended in the financing agreement.

Significant Accounting Policies

I Accounting Convention and Statement of Compliance:

The Accounting policies and methods of computation followed for the preparation of these financial statements are in consrsterrri1rdea-J-in-g-with-items which are considered material to·thc SBJP Financial Statements for the year ended June 30, 2016

Page 5

' MANAGER FINANCE

Project Management Office

~ Currency of Accounts

The accounts are maintained in Pak Rupees .

. . Foreign Currency Transaction

Cash receipts and payments arising from transactions in foreign currencies are recorded in PKR by ,applying to the Foreign Currency amount, the exchange rate at the date of receipt of funds from donor. 'The rate of exchange used for donor reporting purposes by the project authorities would be the rate of exchange applied by State Bank of Pakistan for converting foreign currency into Pak. Rupees for that

!tranche at the time of receipt of funds in the SBP from the donor. In case of more than one tranches, the rate applied for each tranche will be used for donor reporting purposes and fund received in the first tranche will be utilized first and the unuti lized balance shall be attributed to the last tranche (Finance

jDivision Office Memorandum No. F.2(l)BR-JV2007-949 dated Augu'st 02, 2013) .

. Revenue Recognition

Revenue is recognized on the date of receipt of money by bank or clearance of cheque. Revenue is irecognized on gross basis and any related costs are recorded separately. ·j Cash Flow Statement

The cash flow statement is prepared both in year-wise and cumulative in order to enable comparison on yearly Receipts and Payments.

Receipts for the Project from IDA & GOS:

lReceipts from IDA (World Bank Financing):

All funds transferred by World Bank for the project activ1t1es are placed in Designated Account/Assignment Account under the title "Sindh Barrages Improvement Project" maintained with the National Bank of Pakistan at Main Branch Karachi. The outflow from the designated account represents that, the payments have been paid for in tended project purposes under loan agreement of

'5684-Pak, between lslamic Republ ic of Pakistan and IDA.

Duri ng FY 2015-16, only one (O J) withdrawal application has been rep lenished by the Bank, details as : below .

. ;. :.'.. ·~"t .. /-':'t. " . , -~; "\ · · · Wl:YJJDRA w;u;-Rcfi:cticc ·

. ~· ..• ~,;·~~- '-f·;: . ·:.'~ •.::,. ! . ,·,)

.... . . ,:: . US$ PKR Amount

SBJP-01 291581486 2786081 Total 291,581,486 2,786,081

Counterpart Receipts from Government of Sin db (GoS):

The counter-part share@ I 0% is earmarked for civil works only which relates to Component-A. During the FY -20 15-16 no funds from GOS were re leased as works related activity has not been carried out during this period.

Page 6

Project Management Office

I Component Wise Expenditure Detai ls:

.1 Component A: Rehabilitation of Guddu Barrage

Categories Civil Works

2015-16 IDA GOS

Consultin Services 178,425,413 B: Sub Total of Disbursement Com onent-A 178,425,413

.2 Component B: Improvement Barrage Operation

2015-)6 Gate ories

JOA Goods

Consultancy Service

Training and Worlcshop C: Sub Total of Disbu~ement Compooent-B

Component C: Project Management and Monitoring and Evaluation:

2015-16 Categories IDA

Cost 9 063,018

Training and Worksho 3,372,702

D: Sub Total o Disburse111e111 Con, ouent-C 12 435,720

Cash & Bank:

Cash in Hand -Cash at Bank I 00, 720,353 Total l 00, 720,J5J

Authorization for Issue:

Financial statements have been authorized for issue by the Project Director on 30-06-2016.

General:

Figures have been rounded off to the~st rupee. Comparative figures have been arranged where uecessary for the purpose of comparis;lfl' v"'

iJ,; ,tl' JJ ~\

~\~ •.

Page 7

Sindh Barrages Improvement Project C r edit Accoun t >o. TDA- 568~ PAK

Bnh1 nce Confirmntion Statement

for the FY ended 20 15-2016

PKR Opening Balance

Rectipts (ID.". Funds)

lot.-11 Fin3nci11g 291.581 A86

Ex pen cl i tu ,·,·s ( 190.86 I, IJJ)

Closing B>1 lance 30th .June- I 6 ,1s per nan I, S ta tcm rn t 100,720,353

MANAGER FINAf..JCE Project Mona9~1nent Office

17

USS

2,786.081.00

2, 7 lif,,IJR I. 011

( 1,823,69 I. I 5)

962,389.85