Office of the

rim. .~ M,2r öa .=.t t

Provincial Audit WingConstitution Avenue

Islamabad

No PA/F AP/Federal/F-l3/ I Dated 31-122015

1 The Secretary, Economic A tini Pak Secretariat Block "C- Islanabadhe Couniry Director, World Bank, 20-A, Shahrah-e-Jamhurial, Sector G-5/1, slamabad

Subjec: Foreign Aided Projects (FAP) Audit Reports

Financial Attest Audit of the following World Bank 'inded prci,jccs for the

Financial Yea 2014-15 has been conducted by this office

i Financial Attest Audit Report on the Accounts of Second Trade andTransport Facilitation Project (Ministry of Comnierce) IDA Cr. 4577-Pak for the F Y. 2013-14

ii. Financial Attest Audit Report on the Accounis of Second Trade andTransport Facilitation Project (Planning Commision) IDA Cr. 4577-Pakfor the F.Y. 2013-14

ii. Financial Attest Audit Report on the Accounts of Water Secior CapacityBuilding and Advisory Service Project IDA Cr 4437 for Ihe F Y 20(14-15

g. Financial Attest Audit Report on Ilie Accounits of TreitArv L.ducationSupport Project IDA Cr No 4886-PK & 4887-PK FEC Foi the i2014-15

v. Financial Attest Audit Report on the Accounts of Sirengtheni theForum of Pakistan Ombudsman TFT2310 för the F.Y 2014-15

vi Financial Attest Audit Report on the Accousis of Pakistan Povemi1Alleviation Rnd IDA Cr No. 4599 for the F Y. 2.14-1S

2 Atudit Reports of the above mentioned projecis have been iialized afterconduetiig Quality Control Review and are being issued for necessary consuimption of theGjovernmient and the Development partner i e World Bank

EnLcosure: fAs Above)(M111=amd

aem

Provincial Audit WingCc

DG Audit Federal Governnent, Islarmabad, with the request to issue a copy ofthe above reports to the project nanagement for ftrther necessary action

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Financial Attest Audit Report on the Accounts of

Second Trade and Transport Facilitation Project

(Trade and Transport Facilitation Unit)

International Development Association

Loan No. IDA-4577-Pak

Ministry of Commerce

For the Financial Year 2013-14

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* Auditor General of Pakistan Islamabad

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TABLE OF CONTENTS

Abbreviations and Acronyms...........................................PREFACE.......................................................E PA RT -I................................PROJECT OVERVIEW..............................................2AUDITOR'S REPORT TO THE MANAGEMENT.............................3FINANCIAL STATEMENTS..........................................4PART-II.........................................................COVER LETTER TO THE MANAGEMENT LETTER .................. 6EXECUTIVE SUMMARY ....................................................... 8MANAGEMENT LETTER...............................................91. INTRODUCTION .......................... ................... 10I 2. AUDIT OBJECTIVES................................................J13. AUDIT SCOPE AND METHODOLOGY.............................104. AUDIT FINDINGS AND RECOMMENDATIONS.......... ......... 12

4.1 Organization and Management..................................124.2 Financial Management..................................134.3 Sustainability.......................... ...................16I 5. CONCLUSION......................................... ...........16

ACKNOWLEDGEMENT.................................... ....... 17

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Abbreviations and Acronyms

AGPR Accountant General Pakistan Revenues

EAD Economic Affairs Division

ECNEC Executive Committee of National Economic Council

GFR General Financial Rules

IDA International Development Association

IPSAS International Public Sector Accounting Standards

ISSAI l nternational Standards of Supreme Audit Institutions

NTCMU National Trade Corridor Management Unit

O.M. Office Memorandum

PC-I Planning Commission-I

PSD Public Sector Development Programme

Rs. RupeesTTFU Trade and Transport Facilitation Unit

UNCTAD United Nations Conference on Trade and Development

USD United States Dollar

WTO World Trade Organization

OfieMmrnuIlnigCmiso-IulcSco eeomn rgam

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PREFACE

The Auditor-General conducts audits subject to Article 169 and 170 of the Constitution of theIslamic 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"Second Trade and Transport Facilitation Project (Trade and Transport Facilitation Unit)" underthe Ministry of Commerce Loan No. IDA-4577-PAK for the Financial Year 2013-14 funded bythe International Development Association (IDA) was carried out accordingly.

The Directorate General Audit, (Federal Government), Islamabad conducted audit of the"Second Trade and Transport Facilitation Project (Trade and Transport Facilitation Unit)" duringDecember. 2015 for the period 2013-14with a view to reporting significant findings tostakeholders. Audit examined the economy, efficiency, and effectiveness aspects of the "SecondTrade and Transport Facilitation Project (Trade and Transport Facilitation Unit)". In addition,Audit also assessed, on test check basis, whether the management complied with applicable laws,rules, and regulations in managing the "Second Trade and Transport Facilitation Project (Tradeand Transport Facilitation Unit)". The Audit Report indicates specific actions that, if taken, willhelp the management realize the objectives of the "Second Trade and Transport FacilitationProject (Trade and Transport Facilitation Unit)".

The Report consists of two parts. Part-I contains Auditor's Report (Audit Opinion) and FinancialStatements. Part-H contains Executive Summary, Management Letter and Audit Findings.The Report has been prepared for submission to the International Development Association(IDA) in terms of Loan Agreement No.IDA-4577-PAK.

Dated: 2-.12.2015 (Junaid Mushtaq ureshi)Place: Islamabad DIRECTOR GENERAL

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PART-I

N I. PROJECT OVERVIEW

I 2. AUDITOR'S REPORT TO THlE MANAGEMENT

E 3. FINANCIAL STATEMENTS

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PROJECT OVERVIIEW

Name of Project: Second Trade and Transport Facilitation Project (Trade andTransport Facilitation Unit)

Sponsoring Authority: World Bank (International Development Association)Executing Authority: Ministry of CommerceI Loan No: IDA-4577-PAKPC-I Cost: Rs. 510.000 million

I Date of Commencement

(As per PC-I): December, 2006I Actual Date of Commencement: January, 2007

Date of Completion (as per PC-I): December, 2013Dated of Approval by ECNEC: 30.11.2006

Loan Closing Date: December, 2013

The umbrella PC-I of Second Trade and Transport Facilitation Project was approved byECNEC in its meeting held on 30.11.2006 at a cost of Rs. 1,500.000 million consisting of twocomponents, i.e. National Trade Corridor Management Unit (NTCMU) and Trade and TransportFacilitation Unit (TTFU) to be implemented by Planning Commission and Ministry ofCommerce, respectively. Later, in 2010 the project cost was revised to Rs. 2,125.000 million dueI to increase in dollar value from 1 USD = Rs. 60 to Rs. 85. The revised total cost of TTFUcomponent under the Ministry of Commerce was Rs. 510.000 million (USD 6.000 million). TheProject was funded by World Bank/IDA credit at an interest rate of 0.75%, repayable in 20 years.

The objectives of the project are as under:

i. National Trade Facilitation Strategy and WTO commitments

ii. WTO trade facilitation negotiations and regional corporation mechanisms

iii. Trade procedures analysis and corresponding capacity building

iv. Trade, transport and transit operations analysis and corresponding capacitybuilding

v. Trade information, education and capacity communications

vi, Pilot projects

vii. Benchmarking performance

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AUDITOR'S REPORT TO THE MANAGEMENT

Auditor's Report on the Trade and Transport Facilitation Project (Trade and TransportFacilitation Unit) Financial Statements

We have audited the accompanying Financial Statements of "Trade and Transport FacilitationProject (Trade and Transport Facilitation Unit)" under the Ministry of Commerce IDA LoanNo.4577 that comprises Statement of Receipts and Payments together with the Notes formingpart thereof for the year ended 31s' December, 2013.

Management ResponsibilityIt is the responsibility of the project management to establish and maintain a system of internalcontrols, 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.

I Auditor's Responsibility

The responsibility of the auditor is to express an opinion on the financial statements based on theaudit 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. Theaudit 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 statementpresentation. We believe that our audit provides a reasonable basis for our opinion.

Opinion

In our opinion:

I a) The financial statements present fairly, in all material respects, the cash receipts andpayments by the project for the year ended 3f1" December, 2013 in accordance with CashBasis IPSAS, Financial Reporting under the Cash Basis of Accounting Standard.

b) The expen res have been incurred in accordance with the requirements of legalagreemr.

(Junaid ushtaq Q eDirector GeneralDirectorate General Audit (Federal Government),Benevolent Fund Building, Zero Point, IslamabadDated: 2,2.12.2015

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FINANCIAL STATEMENTS

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ITRADE AND TRANSPORT FACILITATION PROJECT

(TRADE AND TRANSPORT FACILITATION UNIT)MINISTRY OF COMMERCE

Financial StatementLoan No. IDA/4577-PAK

Statement of Financial AffairsFor the Financial Year 0P "July. 2013 - 31 December. 2013

Cash in-flow from stakeholdersRupees

A- Receipts 2013-14 (July-Dec) 2012-13 CumulativeCash & Cash Equivalents 17.204.603.18 30.755.018.18 47.959.621.36at the Year beginningGOP (CounterpartFinancin,)E IDA (SOE Procedure). - --

IDA (Direct Payment)_ - 66.292.106.00 66.292,106.00Increase/decreaseexchange fluctuationTotal Receipts during 17,204,603.18 97,047,124.18 114,251,727.36the year

ICash OutflowB- Payment (Operating Activities)

2013-14 (July-Dec) 2012-13 CumulativeConsulting Services 3,346.043 66.292,106 69,638149Incremental Operating Cost 6,956.353 13,550,415 20,506.768and recurrent costsCash Utilized in Operating 10,302,396 79,842,521 90,144,917

I2013-14 (Jul y-Dec) 2012-13 Cumulative

Cash & Cash Equivalcnts 6.902,207.18 17.204.603-18 i 24.106.810.36

(M. Salim Khalid)Deputy Chief (Dev.)

Ministry of Commerce/J)VW NI) fftWY.Islamnabad

Mubammad Salm IhaldDeputy chief

Minitry of CommercetGovernment of Pakista"

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TRADE AND TRANSPORTFACILITATION PROJECT(TRADE AND TRANSPORT FACILITATION UNIT)

MINISTRY OF COMMERCENOTES TO THE FINANCIAL STATEMENTFOR THE YEAR ENDED 31P December, 2013

I . THE PROJECT

1.1 The Trade and transport Facilitation Project-2 (Trade and Transport Facilitation Unit(TTFU) is a project of Ministry of Commerce and is effective from P1 December 2007 withthe closing date of December 31. 2013. Government of Pakistan (GOP) entered intoagreement with "International Development Association (IDA)". for arranging financingarrangements for the reforms in progress at the project.

1.2 In accordance with Development Credit Agreements IDA has sanctioned credit ofSpecial Drawing Rights (SDR) 16.800 Million for the Project. A sum of SDR 12.750 millionallocated as part B to this Unit. The expenses are to be met 100% from Loan account.

I . Significant Accounting Polices

Following accounting policies have been applied consistently in dealing with items. whichare considered material to the TTF-2 (Trade and Transport Facilitation Unit). Ministry ofCommerce financial statements:

2.1 BASIS of Preparation

The financial statements have been prepared under the IPSAS cash basis.

2.2 Accounting convention

These financial statements have been prospered under historical cost convention with cashbasis of accounting. Accordingly, expenses are recognized. when paid rather incurred.

2.3 Currency

The financial statements have been prepared in Pak Rupees except for few disclosures thatI have been made in notes to the financial statement. These notes have included both the foreigncurrency as well as their equivalent Pak Rupees as per the SBP exchange rate prevailing onthe date of the bank payment.

2.4 Government funds & grant

Funds allocated to Project from IDA are not recognized till these have been credited in theAssignment Account maintained with the National Bank of Pakistan. Civic Centre Branch.Islamabad.

(M. Salim Khalid)Deputy Chief (Dev.)

Ministry of CommerceIslamabad

MuhammaO Sali" WDeputy Chte

Miuisty of Commerm

1l e 2.5 foreign exchange transactions

Transactions in local and foreign currencies are accounted for in compliance with the FinanceDivision O.M. NO. F.2 (2 (4)-B.S/2000-1 146 dated 25 Nov 2002.

I /(M. Salim Khalid)Deputy Chief (Dev.)

Ministry of Commerceislamabad

Muhammad Salim KhaireDeputy Chief

ministry of Commes-I Government of PaisirasIslamabad

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Il e TRADE AND TRANSPORT FACILITATION PROJECT

(TRADE AND TRANSPORT FACILITATION UNIT)MINISTRY OF COMMERCE

NOTES TO THE FINANCIAL STATEMENT FORTHE PERIOD ENDED 31"' DECEMBER, 2013

I Notes2013-14 (July-December)

Note-B Receipts & Receipts & Payments against financing sourcesIDA GOP Total

US$ Rs. Rs. Rs.

O/Balance 226.159.81 17.204,603.18 - 17.204.603.18Receipt - - -

I' quarter

I 2 nd quarter - - - -__

__ __ __ __ _

Total 226,159.81 17,204,603.18 - 17.204.603.18

Paiments USS Rs. GOP Total1' quarter 27.469.05 2.475.002 - 2.475.002I 2 nd quarter 90,872.69 7.827.394 - 7,827.394

3 rd_quarter

4 th quarterIncrease - -

C/balance 107,818.07 6,902,207.18 - 6,902207.18Total I - I - I - I -

3.1 Exchange fluctuation 30-06-2013A Closing balance on 30-06-2013 was USD (Cash book Balance) 226,159.81B Exchange Rate according to Interbank Exchange on 30-06-20 13C Closing Balance in PKR on 30-06-2013 Cash Book 17.204.603.18E D Closing balance in PKR on 31-12-2013 6,902.207.18E Exchange Gain (D-D) NA

I(M. Salim Khalid)

Deputy Chief (Dev.)Ministry of Commerce

Islamabad

Mahammad Salim hlidDeputy Chief

Ministry of commerCeGovernment of Pakistan

islamabadIU

Il e, TRADE AND TRANSPORT FACILITATION PROJECT

(TRADE AND TRANSPORT FACILITATION UNITU)MINISTRY OF COMMERCE

Loan No IDA/4577-PAKWithdrawal schedule

For the Financial Year 01P July. 2013 - 3]SI December. 2013

2013-14 (July-December) Value: USSS # Currency W/A-# _ Categorywise ExpenditureReplenished Total

I I

Total

(M. Salim Khalid)Deputy Chief (Dev.)

Ministry of CommerceIslamabad

I Muhammad Salim KhalidDeputy Chief

Ministry of CommercetGovernment of Pakistan

Islamabad

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ITRADE AND TRANSPORT FACILITATION PROJECTI.. (TRADE AND TRANSPORT FACILITATION UNIT)

MINISTRY OF COMMERCELoan No IDA/4577-PAK

For the Financial Year 01" July 2013 - 3 1S December. 2013

ISPECIAL/DESIGNATED ACCOUNT STATEMENT

Value: US$

For year Ending 2013-14 (July-December)Account No. 0154Depositary Bank National Bank of PakistanAddress Main Branch IslarabadRelated Loan/Credit No. 4577-PAKCurrency us$Opening Balance on 01-07-2013 226.159.81Add IDA ReplenishmentTotal 226.159.81Deduct: 118.341.74E SOE Reimbursements

Total11]8.341.74

I Cash Book Balance As on 31-12-13 107,818-07Bank Balance As on 3 1-12-2013 107,81807

/

(M. Sa$im Khalid)Deputy Chief (Dev.)

Ministry of CommkserceIslamabad

Deputy Chief

US

226I159.81

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Mivnisnt of ommerisambad

INote: 5 Incremental Operating cost and incurrent costs during this year

2013-14 (July-December)

Sub Note Detail Amount (Rs.)5.1 Establishment Charges 3,320,724

_ _5.2 Rent of the Building 614,4605.3 Project pre investment research. 3.346.043

survey, consultant based research.survey

5.4 Office Management 1.462,6645.5 Regional conference on 1.558,505

strengthening transportconnectively

Total 10.302,396

The expenditure for 2013-14 (July-December) has been expended out of fundingof World Bank.

I(M. Salim KhalidDeputy Chief (Dev.)

Ministry of CommerceIslamabad

Muhammad Sal" KhadDeputy Chief

ministry of Commerce.oernment of Pakistan

Islamabad

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TRADE AND TRANSPORT FACILITATION PROJECT(TRADE AND TRANSPORT FACILITATION UNIT)

MINISTRY OF COMMERCE

Loan No IDA/4577-PAKList of Assets during 2013-14 (July-December)

SiNo. Items Quantity

234 NIL

5678

114 / X(M. Salim Khalid)Deputy Ch I e f (Dev.)

Ministry of CommerceIslamabad

Muhammad Salim Kh 3 1110DepUty Chief

rdinistry of comwc,i,overnmera of

IsCertificate

It is certified that expenditure have been used by the Trade and Transport Facilitation Project

(Trade and Transport Facilitation Unit) Ministry of Commerce Loan No. IDA/4577-PAK Ior the

E Financial Year 01" July 2013 - 31"' December, 2013 for intended purposed as per loan agreement

No.4577 from International Development Association (IDA) portion for the year 2013-14

I (July-December).

(M. Salim Khalid)Deputy Chief (Dev.)

Ministry of CommerceIslamabad

Muhammaa Salim KhaloDeputy Chief

Ministry of CommerceGovernmeUt of Pakistan

Islamabad

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