Office of the

i - aSpecial Sectors Audit Wing

Constitution Avenue

Islamabad

No.PA/FAP/Punjab/SSAF- C 1 Dated: 29-12-2016To,

1. The Secretary,

Economic Affairs Division,Government of Pakistan

Pak Secretariat, Block "C",Islainabad

The Country Director,World Bank Resident Mission, 20-A, Shahrah-e-Jamburiat

Sector G-5/1, Islamabad

Subject: FOREIGN AIDED PROJECTS (FAPs) AUDIT REPORTS

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

this office:

S.No Name of Projects DevelopmentPartners

1. Punjab Public Management Reforms Program World Bank

2, Punjab Irrigated Agriculture Productivity Improvement Project WB

Punjab Health Sector Reforms Program (Including Provincial WBHealth Nutrition Program)

4 Land Records and Management Information Systems WB

5. Punjab Education Sector Refoms Prog WB _6. Punjab Skills Development Project W11

2, Certificate/Financial Attest alongwith the Audit Report containing threin the

management letter (ML) on the same is attached herewith. The referred is hereby issue

simultaneously to the Government (EAD) and to the World Bank Resident MISiJ.L0

Islamabad through EAD.

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

above mentioned FAP certificate/Audit Report to the concerned Project Manager as well.

Fnclosures: As above

. Irshad Ahmed Kaleemi

[3 Deputy Auditor GeneralSpcoial Sector Audit

Office Telephone 4051-92229 IOffice Fax#051-9219191

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

1,

FINANCIAL ATTEST AUDIT REPORT

ON THE ACCOUNTS OF

PUNJAB HEALTH SECTOR REFORMS PROGRAM

WORLD BANK CREDIT NO. 5258-PKHEALTH DEPARTMENT, GOVERNMENT OF THE

PUNJAB

FOR THE FINANCIAL YEAR 2015-16

AUDITOR GENERAL OF PAKISTAN ISLAMABAD

TABLE OF CONTENTS

Page No.

List Of abbreviations 2

Pr]elace3

P'ART-1 4

Projeci Overview

Auditr"s Repon-t !o ihe Manageneni 6-7

Financial Staternents 8

IART-iI 9

MANAGEMENT LETTER [o

(Y )VlRING LE.TTR TO TH1E MANAGLMENT LETTER ii

"EXE TIVE SUM MARY 12

I IirLIlduIl2L ion 14

2 . Audit Objective~ 14

3. Audit Scope and Melhodology 14

4. Ak 1 IINDINGS AND RECOMMLINDATIONS 13-28

4.1 Organization and Management

4.2 Financial Mamigemnent

4.3 Procurement and Contracting

44 Overall Assessment 29

(?ONCL'SION 30

.ACKNOWLIXi EM IENT 31

1

PR FACEChe Auditor General of Pakistan conducts audit. subject to articles 169 and 170 of the

Conviitution of the Islamic Republic of Pakistan. 1973, read with Sections 7, 8 & 12 of theAuditor (COIeral'S (Functions, Powers and Ifer-ms & Conditions of Service) Ordinance. 2001-[his audit of Financial Statements of the PSPL. P14SRP financed by Government of the PunjabOd \\ il [0hank hir the linan!al year 2015-16 was carried out accordingly.

The Directorale General Audit Punjab Lahore conducted audit of the PSPU. PIlSRPJuriin Jik and August. 2016 for the financial year 2015-16 with a view to report significantlindings to stakeholders. Audit examined the economy. efficiency and effectiveness aspects ofthe PSPL -. P1 ISRP In addition. audit also assessed, on test check basis. whCther themanagemnent complied with applicable laws. rules and regulations in managing the omilty TheaUdit report indicatos specific actions that, if taken, will help the management realize thejiuended objectives of' the Program. The report has been discussed with (lie PSPU. PH1SR?Nlanagcment in AUgust, 21016.

The report consists of two parts i.e Part-I contains Auditor's Report (Audit Opinion) andliliancial Statements and Part-lI consists of ,ecutive Sumnmary, Management Letter and AuditFindings.

The report has been prepared flor submission to the World Bank in terms of Loan1 aree men t.

(Intisar hmad Khan)Director Geineral Audit, Punjab

Dated:P lace: [ahore.

3

PART-I

1- PROJECT 0 VEIRV IE1W

2- AUDITOR'S REPORT TO THE MANAGEMENT

3- FINANCIAL STATEMENTS

PROJECT OVERVIEW

Name of the Program Punjab Health Sector Reforms Program

Sponsoring Authority Governnent of Punjab, World Bank. DFID, 1 IRITF

C i k Pr raim 12 lmi l ion $ (World Bank)

90 mil hon POUNDS (DFID)

156.3 nillion Rs, (PSPU)

)atc le of Comniencemeni 30-06-20 13

ActuaL Date of Commencement: 01-07-2013

Dat of ('ompletion (as per PAD) 3 1 -12-2017

SiLtus of expenditure:

(R,. in millionlEEP:ls incurred during Expendilure from DFID Expenditure from World

in 20t5-16 Bank in 2015-16

Rs. 27 173.337 Rs. 130 .685 Rs. 16.473

5

AUDITOR'S REPORT

Auditor's Repori n PIISRP Financial Statements

We have aIdited the aceomrnpanying Financial Statemeits of Punjab 14ea1tIh SectorReform Progranm that comprises of Statement l Receipts and Payents, Statenent of

omparison of Budtget and Arctual together with ihe notes forming part thereof for the yearended 30" June. 2016.

Management Responsibility

It is the responsibility of Projec lanagement to establish and inainli a system ofintertial controls, and prepare and present the Statement af Receipts and Payments in conformitywitlh th requirements of Casli Basis IPSAS, Finaneial Reporting under the Cash 3asis ofAcecounling Standard.

Auditr's Responsibility

Vhe responsibility of the auditor is to express an opinion on the Finaneial Statementsba:sed on the audit condueted. We conducted Gur audit in accordance with InternationalStanidards of Supreme Audit Institutions Those standards require that we plan and perform theaudit to obtain reasoiiable assurance that whether the Financial Statements are free of materiatmisstatemenis. The audit piocss includes. examining on a test ba:is, evidence supporting theam]lount.s and diselosures in iih Finaneial Statenients. 11 also includes assessing the accountingpriiples used and signilicani estimates made by management, as well as evaluating the overallstalmem presentation. We believe that our audit provides a reasonable basis for 0ur opinion.

In the lighi ol above. in case of preseni projeet, tIe responsibility of auditor translatesi]ntO the followingt:

To express an overall opinion on the Finaneial Statements with respect to the fact thatulte Jigures of Receip1s ad Payments rerected in the Finanieal Statements pertaining to theporion of budgeof HeIalth Department. i Government of Punjab, designated 4s EEP in theProject Appraisal Doeument,

Opinion;

In ouu opinion:

(a) Lxcept to ili exteni ol record not produced valuing Rs. 645.216 million as pointedoul in para 4.1.1, the Firancial Statements present fairly, in all material respeets. the Cashrcceipts and paymienits pertaining to the EEP (Fliglble Expenditure Progran) i.e. the employcerdLat.ed expenditure f Iiealth Departiment. Governent of Punjab, for the year ended 3 0L June,

2016 and are in conformity with cash basis IPSAS - Financial Reporting under the Cash Basisot Accounting Standard.

(b) Review of the Annual Appropriation Accounts of the Government of the Punjab forthe year 2015-16 conducted during Certification Audit by this office, provides a reasonableassurancc that the Provincial Health Institutions of Department of Health, Government of theP'unjab have utilized their proceeds for the salary related cost for the intended purpose iepayment of employee related expenses of provincial health institutions (EEPs)-

(Intisar A mad Khan)Director General Audit Punjab

Place: LahoreDate:

7

FINANCIAL STATEMENTS

FOR THE YEAR ENDED ON 30"'JUNE, 2016

8

Punjub Hialti Sector Refrmns ProjcctiDA Creelik N. 52580-PK, DF]D Pl'NP 202488 Grant 2013-17& FRITF Grani No- 15283-PK

Stternent of Cash Receipts and l'ayments

For the Year Ended June 30., 20162015-2016 2014-2015

Receipis Recipts

(PIayments) Paynent by (Paymental Paynin. by

Controlled by Third Parties Contrulled by Third I'urtirsProjeet Projrect

StG Amoufti in Pak Rupees Aiit Pak Ruped

RECEIPTS

Gtvemment of ILhe Pinjab (GoPh) - DOI EbP 5 - 27173,337,931 23,49684 I X493

External Assistance:

DFID 6-1 1,3G1,685,204 1,924,730523World Bank 6.2 - 101.662400HRITF (Gra-t) 6.2-

Total 1.3-1,685,204 27,173,337.931 2,026392,623 23.496,141.093

PAYMENTSGovenunent of the Punjab (GoPb) - DOIl EIEP 7 - 27J 73337,931 23é4 96.84 L9tExernal Assistance:

DFID 1,301,685204 - 1,924,730,523

Wodd Bank 16,473,40 - 708J0 2

-IRITF (Grant)Total 1,318,158,612 27,173,337,931 1,925,438,535 23,49,941,093

Petty Cash

increase/ (Decrease) in Cis (16,473,408) -10,954,088

Cash at Beginn ing of Year 100,954,08-Cash at End of Year 84,480,680 - 100,954,088

Thc accompanying notes Fom an integral part of thce Gnancial statemerits,

Fiici angeiktSpecialist Projeel c) reerPuajab leilth Sector Reftris Projeet

NM EsvTok

Punjab Health Sector Reforns Project

IDA Credit No4 52580-PK, DFID PHNP 202488 Grant 2013-17& HR1TF Grant No. 15283-PKSta eIMent ofCurmpurison of Budget Hnd Actual Amminis

Por the Ve:ur Ended June 30, 2016Amyon iiin PAk Rupees

Budgeted *Actuaf Difference

Amount Amount Budget mid Actual

CASH INFLOWS

Government of thc Punjab 5 3 6,016,502,026 27,173,337,931 8,N43,16 -095External Assistance:

DFID ** 6 1,762,646,995 2,716,646,995 (954,000,000World Bank 6.1 -IRTIF 6.1 - -

Tothl Receipts 37,779,149,021 29,889,914,926 7,889,164,095

CASH OUTFLOWS

HoD Employee Related Expenses 7 36,016,502,026 27,173,337,931 8,843,164,095External Assistance:

DFID 6.3 1,762,646,995 1,301,685,204 460,961 791World Bank - 16,473,408 (16,473,408)H-RTIF 6 -

Total Payments 37,779,149,021 28,491,496,543 9,287,652,478

NET CASH FLOWS - 1,398,488,383 (],JS,48S,383)

Actual amounts encompass both cash and third party settlements-Actual amount from DFID includes Rs. 954 M already released by FD to IRMNCH in FY 2015-16.

na iat Specialist Projecl iretor

Punjab Health Sector Reforms I'ropcl

unjib l I lik Ser tar lReformns ProjrellDA Credii No. 525g0-PK & iIR I Grani No. I5283PRNotes to ilie Fiumnicial SaercintsI or ti l ir Emnlcd June 30, 2016

] Repriling knlityThe Fininricial SCtaMCetnIs are for P3lwjala Haajih Sctor R-farnj Projc, (F}HSRF). The finanil statmennts encnipassc ithe sopartirg entiy as

deltmed m11 the Vlåncing and Grn1 Agreenktns between 1he isiulIc RepubLie of Pakisian aid the World Bank for Ilie projeCL TIhe Fiinalumgagreereni of USS l 00 million ([DA Credji No. 5258-PK) was sigiLed on December 02, 2)1 3 and 2te Grant agreemient of US$ 20 i illion(FIRITF Cni No. l 5283-PK) wa signcd on July 09, 2014.

Tie Projecr (PI [SR.P) slrted on 01 July. 2013 to support the inplementninL of ihe Punjub Health Scir Smrtegy, by focusing on lheimprovemnent of he coverage and utilization of quality essential health servieess panictilrly iii lie Low Perioring DisiTiets of Puunjab PuM:cyaind Stralegic l'Luniing Uä[ ISPU) of ihe filealth Depirseni is le respoirsible for projct ecordination and the Program Direewr PSPlJ i ihiePmiect Dire«nor oU~Pl [S R.P

For Nhe p1rrpose of tiese financial statements, 1he reporng etity comprises EE and erxpenditire incurrl for ite projec purposes defined in the

eiedi agreeme "t Eigible Experditure Program" end teronyrn "EEP" mean die reasonable cuasts f salauics, allowanes, and rekied costs o fheulth seh mr statf of Punab's ealth Lucilirs and institions, whic are defiried expeidiktes iictTed by Pinjab under Pudget (rmnt/FundNurnber PC 210l6 - lealih ServiCes, FCutio1 CDes 07 - Ika11h Services and 09 - Edncation Affairs & Servim, and Oject iade: A 01 -

Eni e Related E.xpeoSce

Accanntan General Punjab nakes påyments and nöatain accoicinig records of EEPs using the government financial rnanagtment rnform

rystmcrnlIFRA Systern. PSPU jain,tais marial accounting recods fr payments made frm the Desigiibed/Assignment Acons for ieprijeet purposeq.

2 Ccrliflcat ion by Pröjett Management on Appliestion of Punds

Itis certiled lha. funds against Credit Ni. 52580-PK and Grant No, 1523-PK have onty been utiïzed fkr ie project purposes as defied in difnancing ag lbi s.

3 Acco.n ling Convenion d Statement of Compliance

The Financiul Staite s of PSRP have been prepared in accordrice with Cash Basis inrematonal Public SeKtor Arounting Standards(IPSAS), Finaniai Reporting under the Coså Basis of Accolnting.

The uccunting policies have been applied conisieny iroughot tie period.

4 Sigktifcant ACC2nuntiag PoEEciesThe significant aceunting po[icics applied in ihe preparation ofthesec finarcial stalernenits are set au[ below.

4.1 Foreign Currrncy YTas~Opn

Cash receiprs and paymtents arising from transaetions in fireign curreicy we roded in Pak Ripems by applying exchange rate applied by the

State Bank f Paukisan for covertring foreign currency into Pak R4pecs fcr thartranche iat die une ofreeipt offunds ift the SBP froni ie Dim r

in accordance with ie reved accountrig procedure for revofving Lund accoutnts (foreign aid assignment aceunt) rintified by thie Fisnec

Division (Budget Wirng)

4,2 R nepor6g CurreyAll ammaints in iv finanial staenits re i Pak Rupees.

4.3 RrCWUe RrcogniktinRevnu [s retngniZed on de dale of receipi of monzy by bank or clearan~ of cheque. Revenue is eognied on gros bns ond any rielaied

costs mn; ecoed pasaely

4,4 RecgniAon jflpendkureExudiurc is recognized on he date when payment is made or chequc is issued. Financial yor ta whih die pmynents pertain is determined by

the date on whichL a cheque nr paymentadvice is issued.

4.5 Emnplryrr Tetnda SenefltsService benefits of employees deputed frorn he governelt depainllts are accounted for in dhiir respecive depiments whleicas die

conIraetual employees are paid lUnip sMn pay in accordance wih Ihrir cJintracts.

5 Reccipts - CovernmnIt of tite PumiabThis represcts die fundh prmvided by Governnenit of die Punjab ta Helih Department (Novncial) to pay fbn EEPs for the finanial year 2015-

Ii

-i p2ujb Ilualli 6ec Li Relfb·na Prori:I

IDA Credit No. 52580-PK & liTi l Gra ni No, i5253.CK

N4ges to lie Fin:ariCiAl SItIINIKs

vikr thi tVr Eu riel June 31) 20-1

6 rI[ al o li .ssiS:O CElv RS. 237S Million was released l:y DFLD to olP, lissie Departimöll ami t mn11

.5 'l P i o. 7 M W A M Il d ljo vP4uO UJ pVg run me p a .glm 'Se nnd ls iness l 'k i 20 15' do ing f iane a l year 20 15-16 . W hlei an uL.dIiou l

i R-.. 954 milhiu was released lo lnfNCH by FLnance Depärilietitl programme, in turn, spet aR oIm1i11it -JR%

M0 Muitlion durig irnncial Y= 2015-16 and a b lanice of Rs 461 Million reum ined unspert. T is qnsp i z bal ie , however . iilUd2

conli,Lijre, Ml pin ditur oCRan 412 MilLion awd rcn20l li5- l p ' r [ bilane of Rs- 49 Milion as been inc ided iii Third Business PLui lld w ulld

be re;ilocattd tbrough TIird Busife5s Plna

f.2 An aoint of Rn. 55 Millinn of extenal assishairce was reccived fron World Flank wleraas no imaun was received from LIR[TF durng

flinancial year 2015-16

6,3 6-1 Ticre [has been mio instance of non compiumec wihib ie ierms and conditiofit of the financing emni beween dtt DFID, World Bank

and CDP wi[ch have resuted it (te cameellat[on ofgrnE.

6.3.2 There has been tton cornpEisnx with the terrns and condions of the finang arnrreril betwe se RITF and GoP whicli hgve

resulted in the cancetlatton of grani-

6,4 Undrawin External Asistna-s n

Undrawn Credix at reporting date represent anowin specied in die financing and graM a4 tCnts begrwtt ill World ganrPRF) and COF,

tat the World Bank/DFID will disbursm for the prqject purposesAmnauuts in USI

2015-16 2014-15

72,712.071 77,929,001

iDA Credit No. 52580-PK 2,0,1}

Ti11' Grant No. 152S3-PK ,4 20,302000

154,552,71 208.231,5041

64. DIlyS Undawn uediK of £44,640 Million is beiag tirslated at an excharige rie (1.13) ised in World Bak's PAD for convers9o of UK

Pound (£) to US Diliar (S).

7 Emaployce Rellattil Expens-R

This represen tic suafi, aIlIIOwacs and other relaed costa of healh seT stoff (DOH ProVinciaI) of Puijabs lnth facilities and

institutions (referred a3 E-l Ps) for tbe finanrial yar 2614- 15, äainst die f~ "ing:

Brug (3rnr. PC2101f

Obftd Code_- ADL - Employee Related Expesfis

unrnon Code 07 - Hcah Servics & 09 - Education Affirs & Services

The paynents werc made by the Accountant General using the govemnnr financial rnanagernent inflormarian system

8 Cash And Bank kmAiftts in PRk fn pcca

201S-16 2014-15

Cipsh at [Bansk .1 K4K48,60 [00954,088

Cash at Ilan d

-

&1 Casl in MB ankTis reprsaJ bal book balances a t JP>k 30, 2016 of the World iank designated count of Rs. 76,357381 and HITF of Rs Nil

respectively.

9 Asutbrizintio for LsaCThesc financiid stameients have ben autlhorLzed for iss by the PrVic DIC(Cor4n311

O Genecral

Figuires have heen ronded off to the nearest rupe

ifln Mn tgåEo Srjt Director

F M g PPunjab Ialt Sector Reforols .iroet

. gr m m w 4a Ul C N -tt r- > n D rm co O 2 wo o rx L " N w -" il PO M C-

- - r u -"1r o o' 0-r-<. 4flrfl r

c C« N N LO 3 " in 9 m N N m

1- (NCD- (flflrL' 402 m t f l n OO r-4 flr, m r» D C» 4n e 0 no it, r- e e

4 fl . On-t C

f|[ to to to ,-,-O N P

in w MT-

D Fn Ec3 e fm r0 Kf P- ,- U Muj DCý< 0 0r r- r nrro nrfl nwv r co nmc m 2Cl nl -1 -- i - C> - 9 0 K

- VO o 0R l- V er c é6 c; d9 r'

× -M nr w <0 r- o N o2 2 - r

x T 4 e o 0 r D t C T r M n .-u m- ( 0 cy WOn o or

r_ V (o n ,- < N _ P4 to 4 %Sr-- _ o O O.

ré Of rT t.--o 0 Nij «> nr W ull n

N * 4 O 3r n l e iD a V> ta cl" C (D N r- c3 s1- o * N GG e 0 o 0 r- CI O n N q[

UD w e N C N N ( 4 V

As cd N: KM ; c -c« C jL l 6k

L6 n e r D f2 O p-, - o -r WOn t o N Ln 0o otO

~ *t o ev4 N <0 N 4UD U i Lflr' O

rr) N' t nr C -~* U) C 4 C l3 C

el~ <n 3 cm C2 in r 03 V -tI (,rs en nr rY o cp rUJ

n$ ~ T; m W! 0 n C3 M 0 <D N W rý C n N V W P6_f l b 4 4 0'1 Ci 0 --

3 ,- .o M c LO r- Cr -N_r N _ Kl C, el TrT rM

44

c) -oC 0O O3 Ck 0yO L0a

y O N o e oflONOCN oca CO o O O o OC

- - w -

~~flC- nr ' -tf rL CD tI V, t> Q4 f Tt- ?0 f

cu - m r- e o le O 00 N to in - t,-. -c2 o

E 4 - -h - °- Qr 0 n j -C U4 4 -to

o ~ ~ " 0 Ln M M N nt .äý c-m nr Ifi Kb- e w n - mC4 bi' - 4a o

75,- CA cj Qi|C9

• c a m- 17 N CD La - M- M- nr CO C4 c1 M n 4

-t -a - en t r- ro N r- C4

LS -7 -ý w- w; c6u 6 6 m U;u -- o_-Q- lä - 6 C > m "

-a -

CL z m. 3 m

qp~~~ n~~oO Zl f O Ox C<- - - -O CO 0 DI z z >- -öri ei

-O>- 0 <ne~ ~~~ e, z z -<zz3xü

IV -c- IcI 'ux < < < r r -

tDOu

. w m

W LL-a <cr, Kr < 88 0

-- ri T

nii'

Cg -. Q

DL5' ... L-Lw .C CTCfC

i- -- - 8 6 .888 88)88j888 88888

,q - J

-- I.i ii l

-- - --- -- --- --- z-? - -

- <

o _

LLIT

t: t 3u

CL CLL

05

C3

oL o

to w Za ncni-w e --

C "CLc -

LL Z

w 0~

~i

-o - c C

i --

< 0 i l I~ 4t 2- ~ f

0 e CL

Or -

I'4

8 o

C i- -

o.- l - --

Z 2Ce

ot

0

eor

z zCL _

o

Z LU

Z èC-

0 0 zy

eJc'drJc4 c

>oWrr3fa«LW ,pe~

' 4-2 9-~ <> 0-jr

-J 0> co

- x LL>00 e

L- a- orC