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The Republic of the Union of Myanmar

Office of the Auditor General of the Union

Letter No: Sa Has-3 / 2062 / (137/2018)

Date : October 16 ,2018

To

Union Minister

Ministry of Agriculture, Livestock and Irrigation

Subject: Submission of Audit Report

Reference: The Letter no. 4/5000/ mway yay kyay/ (485/2018) dated15-6-2018

1. Reference is made to the above mentioned request letter , we haveaudited financial statement (2017-2018) of National Electrification Project(NEP) funded by World Bank's Loan (IDA-5727), Government Contributionand Communities Contribution implemented by Department of RuralDevelopment, Ministry of Agriculture, Livestock and Irrigation.

2. We herewith attach Audit Report and Management Letter to be able toconduct as necessary.

Attach- (a) Audit Report, ( 6 ) pages

(b) Management Letter, ( 17 ) pages

(Signed)On behalf of Union Auditor General

(Naing Thet Oo, Permanent Secretary)

Copy to

Department of Rural Development (No attach)

Office file

Float file

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The Republic of the Union of Myanmar

Office of the Auditor General of the Union

Audit Department

Audit Report

On

The Implementation of National Electrification Project (NEP)

The Financial Statement for the period

Ended on 31st March 2018

Financed by IDA Loan (IDA-5727), Government

Contribution and Communities Contribution

by

Department of Rural Development

Ministry of Agriculture, Livestock and Irrigation

Date: October 16 , 2018

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Contents

Sr.

No Particular Paragraph Page

From To From To

1 2 3 4 5 6

1 Introduction 1 - 1 -

2 Management's Responsibility on Financial 2 - 1 -

Statements

3 Auditor's Responsibility 3 4 1 2

4 Audit Scope 5 6 2 3

5 Audit Opinion 7 - 3 4

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Audit report on the Financial Statements for the year ended on 3 1st March 2018of National Electrification Project (NEP) funded by World Bank's Loan (IDA-5727), Government contribution and Communities Contribution implemented byDepartment of Rural Development, Ministry of Agriculture, Livestock andIrrigation

Introduction

1. According to the request of Union Minister's Office (Head Office), Ministry of

Agriculture, Livestock and Irrigation with the letter dated 15-6-2018 to audit the

financial statements for the year ended 31.3.2018 of National Electrification Project

(NEP) funded by World Bank's Loan (IDA-5727), Government contribution and

Communities Contribution implemented by Department of Rural Development,

Ministry of Agriculture, Livestock and Irrigation, we have audited the financial

statements on component (2) Off- Grid Electrification Programee and component(3)

Technical Assistant with required documents in accordance with and Generally

Accepted Auditing Standards and it was examined necessary accounting records and

documents abstracted.

Management's Responsibility on Financial Statements

2. The Project Management is responsible for preparation of financial statements

which are in line with the Financial Management Manual, Project accounting

procedures and those statements must be free from material misstatements arising

from fraud or error which can lead to the wrong management decisions for internal

control system.

Responsibility of the auditor

3. Our responsibility is to conduct audit on the Financial Statements in

accordance with generally accepted auditing standards and those standards require us

to comply with the code of ethics for auditors and to give appropriate audit opinion as

per audit findings after conducting audit with reasonable assurance whether material

misstatement exists in Financial Statements.

4. During the audit, regarding to figures disclosures in Statement of Financial

Position, Project balance sheet, Statement of sources of funds and expenditures,

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Statement of designated account and direct payments and Note to the financial

statements, we obtained audit evidence by evaluating errors and deficiencies and

applying audit procedures based on auditor's assessment and judgment. In this regards,

we have obtained sufficient and appropriate audit evidence in order to provide a basis

for audit opinion.

Scope of Audit

5. We have audited the financial statements of National Electrification Projectfor the year ended 31-3-2018 implemented by the Department of Rural Developmentfunded by the World Bank's Loan, government contribution, and communitiescontribution, auditors from head office carried out audit works including examiningthe international bidding process for Solar Home Systems that are being installed in12 States/Regions including Nay Pyi Taw, verification of projects progress in relationsto mini grid activities by means of Management Information System - MIS, reviewedcontracts, progress reports and photo records. Auditors from Pegu, Thanintharyee,Mandalay and Ayeyarwady Region Auditor General Offices were assigned to performphysical examination on the completion of ICB - 1 activities and the status of projectcompletion for ICB - 2 (Pilot Installation) activities for 2017-2018 financial year.

6. Our physical examination covered only 114 villages out of 288 villages in 9township within Thanintharyee Region and but for the remaining 174 villages theassessment was done based on their photo records as it was difficult to reach there dueto bad weather and flood. Out of (33,100) solars in (505) villages in 13 townships inAyeyarwaddy Region, only (12,441) solar systems installed at 257 villages underICB - 1 were examined as the rest of the villages had been difficult to reach and couldnot able to be examined.

Audit Opinion

7. It was found that Designated Funds were accurately accounted for projectrelated activities; adequate control system, procedures, and records were put in place inusing the funds. In our opinion, the financial statements for the year ended 31-3-2018of National Electrification Project (NEP) funded by World Bank's Loan (IDA-5727),Government contribution and Communities Contribution implemented by theDepartment of Rural Development have been properly prepared in accordance withProject's Financial Management Manual and Project Accounting procedures except forthe following qualifications:

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(a) Bank charges of MMK 2,012,952 for opening of LC (Letter of Credit)which will enable the remittance of USD 6,642,169.19 to Bank of

Communications Co. Ltd, Beijing Municipal Bank in China for the fourthbatch of 35% Payment to Complant LEMI Co;Ltd for installation of solarhome system (ICB-1) was put under Department current expenditure (03-01) without reflecting and adding as Government Contribution, the amountof govermnent contributions was understated in Statement of Sources ofFunds and Expenditure.

(b) As per their contract, the contribution from the communities amounted

MMK 465.924 (in millions) for 8 Mini-Grid projects implemented during

2016-2017 financial year, Communities Contribution of MMK 1,409.354

(in millions) for 16 Mini-Grid projects implemented during 2017-2018financial year, a total of communities contributions MMK 1,875.287 (inmillions) have to be paid but these communities contribution has not beenreflected in Statement of Sources of Funds and Expenditures because ofthe collections of the communities contributions which were notsupervised and monitored by Department of Rural Development and

collected by relevant companies.

(c) Although commercial tax was USD 272,527.09 for the solar home systeminstallation costs, USD 5,723,068.81 paid to Complant LEMI Co.,Department of Rural Development paid USD 286,153.44 equivalent toMMK 382.301 (in millions) to company and it caused the extra payment

of USD 13,626.35 in project Balance Sheet and Statement of Sources of

Funds and Expenditure.

(Singed)

On Behalf of Director General

(San San Win, Deputy Director General)

Date: October 16 , 2018

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