Office of the

Special Sector Audit WingConstitution Avenue

Islamabad

No.SSAW/FAP/Federal/F-13/ / 9 7 Dated: 23 -02-2017

To,1. The Secretary

Economic Affairs Division, Government of Pakistan

Pak Secretariat Block-CIslamabad

2. The Country Director,

World Bank, Resident Mission

20A, Shahrah-e-Jamhuriat

G-5/1, Islamabad

Subject:- FOREIGN AIDED PROJECTS (FAPs) AUDIT REPORTS

Financial Attest Audit of the following FAP Audit Report has been conducted by this

office:

S.No Name of Projects Loan No/Agreement No Executing Agency

I FATA Rural Livelihood & TF-l 1857-PK FATACommunity Infrastructure

2 FATA Urban Centers Project TF-01 2160-PK FATA

2. Financial Attest Audit Reports of the above projects together with the management letter

(ML) are hereby issued simultaneously to the Government (EAD) and to the World Bank

Resident Mission Islamabad through EAD.

3. The Director General Audit concerned is also being requested to issue a copy of the above

mentioned FAP Audit Report to the concerned Project Manager as well

Enclosure: As above

Muhammad Tahir Kamal

Deputy Auditor General

Cc:i. DG Audit Federal Government Islamabad, with the request to issue a copy of the above

reports to the project management for their further necessary action.

ii. SPS to DAG FAOiii. Master File

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Financial Attest Audit Report

On The Accounts Of FATA Urban Centres Project

Grant Agreement No. TF 012150 PK

Local Government And Rural Development Department, FATA

For the Financial Year 2015-16

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I Auditor General of Pakistan Islamabad

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TABLE OF CONTENTS

ABBREVIATIONS AND ACRONYMS .................. I.................... .. I

PREFACE ........................................................................ 11

PART-I........ ............................................................

PROJECT OVERVIEW ....................... 2.........................2

I AUDITOR'S REPORT TO THE MANAGEMENT (AUDIT OPINioN).................................... 3

FINANCIAL STATEMENTS ....................................... ........................ 4

I PART-ll............................................................5

COVER LETTER TO THE MANAGEMENT LETTER...........................6

EXECUTIVE SUMMARY. ............................................... 8

MANAGEMENT LETTER ............................................... 9

1. INTRODUCTION ...... .......................................... 10

2. AUDIT OBJECTIVES............................................. 0

3. AUDIT SCOPE AND METHODOLOGY................................10

4. AUDITFINDINGSANDRECOMMENDATIONS.......................... 12

4.1 Organization and Management...................................... 12

4.2 Financial Management........................................... 13

I4.3 Procurement and Contract Management.................................................... 154.4 Asset Management.............................................. 16

4.5 Sustainability................................................. 17

S4.6 Overall assessment ..................................................... 17

5 CONCLUSION ...................................................... 17

ACKNOWLEDGEMENT ............................................... 18

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Abbreviations and Acronyms

ADP Annual Development Program

FATA Federally Administered Tribal Areas

FDWP FATA Development Working Party

FUCP FATA Urban Centres Project

GOP Government of Pakistan

IPSAS International Public Sector Accounting Standards

ISSAI International Standards of Supreme Audit Institutions

ISU Implementation Support Unit

KP Khyber Pakhtunkhwa

MDTF Multi Donor Trust Fund

NOL No Objection Letter

PMU Project Management Unit

TARUCCI Tribal Areas to Urban Centres Conversion Initiative

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PREFACE

The Auditor General conducts audit 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 and Terms and Conditions of Service) Ordinance, 2001. The audit of FATA

Urban Centers Project under Planning and Development Department FATA Grant Agreement

No. TF 012150 PK for the financial year 2015-16 funded by the Multi Donor Trust Fund through

World Bank was carried out accordingly.

The Directorate General Audit (Federal Government), Islamabad conducted audit of the "FATA

Urban Centers Project " in 2016 for the financial year 2015-16 with a view to reporting

significant findings to stakeholders. Audit examined the economy, efficiency, and effectiveness

aspects of the "FATA Urban Centers Project". In addition, audit also assessed, on test check

basis, whether the management complied with applicable laws, and rules and regulations in

managing the "FATA Urban Centers 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-I 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 International Development Association

(IDA) in terms of Grant Agreement No. TF 099175 PK.

Dated: /6 .02.2017 (MUHAM D A GONDAL)Place: Islamabad IRECTOR GENERAL

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I1 PART一，

1 .PRO.IECT OVERVIEW

l:.Aon;ToR，、．Po。：。TH,MANAc；。，、TI&F,NANC,AL sTATEMENTs

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PROJECT OVERVIEW

Name of Project: FATA Urban Centers Project

Sponsoring Authority: Fata Secretariat through Federal Government

Executing Authority- PM-U- TARUCCI- FATA

Grant Agreement No: TF 012150 PK

PC-1 Cost (Original) Rs. 598,500 million

PC-1 Cost (Revised) Rs,750.00 million

Date of Commencement: April, 2012

Date of Completion: June 2015(as per PC-1):

PC-1 Cost: Rs.750 million

Grant Closing Date: January, 2016(Extended time)

Expenditure (2015-16). Rs. 139,036,296

Aggregate Exp up to2014-15. Rs. 555,776,006

2

IIIE Mr. Fayaz Ali Shah

Project Director,FATA Urban Centers ProjectGround floor, Zai Apartments.Warsak Road, Peshawar.

I Auditor's Report on the "FATA Urban Centers Project" Financial Statements

We have audited the accompanying financial statements of the FATA Urban Centers Projectunder the Planning and Development Department, FATA Grant Agreement No. TF 012150 PKthat comprises Statement of Receipts and Payments together with the Notes forming part thereoffor the year ended 3 0 'h June, 2016.

Management Responsibility

It is the responsibility of the project management to establish and maintain a system of internalI controls, and prepare and present the Statement of Receipts and Payments in conformity with therequirements of Cash Basis IPSAS Financial Reporting under the Cash Basis of AccountingStandard.

Auditor's Responsibility

The responsibility of the auditor is to express an opinion on the financial statements based on theE audit conducted. We conducted our audit in accordance with the International Standards ofSupreme Audit Institutions. These standards require that we plan and perform the audit to obtainreasonable assurance whether the financial statements are free of material misstatements. TheI audit process includes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements. It also includes assessing the accounting principles usedand significant estimates made by the management, as well as evaluating the overall statementE presentation. We believe that our audit provides a reasonable basis for our opinion.

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 30"' June, 2016 in accordance with Cash Basis

IPSAS Financial Reporting under the Cash Basis of Accounting Standard.

b) The expenditures have not been incurred in accordance with the requirements of legalagree nt(N--

(MUHAMMA A AL GONDAL)Director G ne alDirectorate eral Audit (Federal Government),Benevolent Fund Building, Zero Point, Islamabad

Dated: /6.02.2017

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FATA URBAN CENTERS PROJECT

IFinancial Statements

UI FOR THE YEAR ENDED 30TH, JUNE 2016

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IFATA URBAN CENTERS PROJECT

Statement of Cash Receipts and PaymentsFor the year enWJanuary 31st, 2016

Note 2015-16 2014-15

Receipts(Payments) Payment by Third Receipts(Payments) Payment by ThirdControlled by Project Parties Controlled by Project Parties

Rupees

tunal Assistance 5 - 438,157,450

tal Receivts 0 438,157,450

I vmentsConsultancy Services 6 33,501,571 - 72,465-255ILprating Expenses 7 7,470.233 - 19.315,963

vil Works 8 81,200,040 - 2511678,021Goods 9 16,800,812 - 44.353.029I ainings 63,640 -I 6,703

Cal Paiwients 139,036,296 - 388,508,971

crease (Decrease) in Cash (139,036,296) - 49,648,479sh at Beginning of Year 208,795,756 - 159,147,277 -

ash at End of Year 10 69,759,460 - 208,795,756

I c accompanying notes form an integral part of these financial statements and are to be read therewith.

Project tor

mance OfficerFUCPIPMU For TARUCII

AUDir . RFATASecretariat PeshawarIU I rI,Z aaFede$.

fSub fce Vezhawar

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FATA URBAN CENTERS PROJECT

Statement of Comparison of Budget and Actual AmountsFor the year ended January 31st, 2016

Note 2015-16 2014-15

Budgeted Amount Actual Amount Budgeted Amount Actual Amount

Rupees

ternal Assistance 5 - - 438,157,450 438,157,450

Total Receipts - 438,157,450 438,157,450

IPaymentsInsultancy Services 6 2910,000 33,501,571 60,765,000 72,465,255

crating Expenses 7 9,760,000 7,470,233 23,222,000 19,315,963vil Works 8 59,175,000 81,200,040 530,055,000 251,678,021

Goods 9 25,850,000 16,800,812 70.570,000 44,353,029

I ainings 0 63,640 1.380,000 3

tal Parments 97,695,000 139,036,296 685,992,000 88,50 1

e accompanying notes form an integral part of these financial statements and are to be read therewith.

Sub C 6alitPehawa

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AUD RFed ntSub i:'uvShawcar

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IFATA URBAN CENTERS PROJECT

Notes to the Financial Statements

For the year ended January 31st, 2016

1 Reporting EntityThe financial statements are for FATA Urban Centers Project (FUCP). 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 on April 12, 2012 for an amount of US $ 7 million. The project became effective from April 12, 2012 with the closing date

ofJune 30. 2015.

The objective of FUCP is to improve urban services and management in Khar, Bajaur Agency and develop a framework for urban

management in FATA.

The project is implemented through FATA Secretariat

Financing

The financing is made in the Iorm of Credit based on Standard World Bank terms. The Financing Agreement No is Credit Cr

1-112150-PAK.

2 Certification by Project Management on Application of Funds

The FUCP management certified that the funds have been appliediexpenditure have been incurred for the purposes intended in the

financing agreement.

3 Accounting Convention and Statement of Compliance

These Financial Statements have been prepared in accordance with Cash Basis International Public Sector Accounting Standards

(IPSAS). Financial Reporting under the Cash Basis of Acl ting standard.

[he accounting policies have been applied consistently throughout the period.

4 Significant Accounting Policies

4.1 Foreign Currency Transaction

Cash receipts and payments arising from transactions in US 5 are recorded in Pak Rupees by applying the US $ amount the

exchange rate between the Pak Rupee and US $ at the date of receipts and payments. Exchange differences arising at the settlement

of these transactions are recognized in the Statement of Receipts and Pa)ments.

I.2 Reporting Currency

All amount in the Financial Statements are in Pak Rupees.

43 Revenue Recognition

Rcenue is recognized on the date of receipt of money by bank or clearance of cheque. Revenue is recognized on gross basis and

any related costs are recorded separately

4.4 Recognition of Expenditure

Expenditure is recognized on the date when payment is 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.

4,5 Employee Terminal Benefits

Serx ice benefits of government deputations employees are accounted for in their respective departments whilep- er e terminal

benefits are paid to the contractual employees.

ct Director

dmin & Finance Ufficer1,i ru MU For TARU'

A UFA ., Uc t arit PeIawa,

Eede4- .ment.eePashawar

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IFATA URBAN CENTERS PROJECT

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