APR 2017 Public Disclosure Authorized RECEIVEDdocuments.worldbank.org/curated/en/... · Ministry of Industry and Commerce Date: 12 APR 2017 Date: 1 2 APR 2017 2. KPMG Lao Co.,Ltd

19 APR 2017

RECEIVED

Ministry of Industry and CommerceSmall and Medium Enterprise Access to

Finance Project

("SMEA2F")

Financial Statementsand

Independent Auditors' ReportYear ended 30 September 2016

loon Member Firm of KPMG International

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Ministry of Industry and CommerceSmall and Medium Enterprise Access to Finance Project

Contents Page

Project information 1

Statement of management's responsibilities 2

Independent Auditors' Report 3-4

Statement of cash receipts and payments 5

Statement of designated bank account 6

Notes to the financial statements 7-12

Budget and actual payments (Appendix 1) 13-14

Loan utilization report (Appendix 2) 15

Project information

Project Small and Medium Enterprise Access to Finance("SMEA2F") IDA H958-LA and IDA 5471-LA

Funding agencies International Development Association ("IDA")

Duration 15 September 2014 to 30 June 2019

Implementing agency National Implementation Unit ("NIU")Department of Planning and Cooperation ("DPC")Ministry of Industry and Commerce ("MOIC")

Project director Mr. Phouvieng PHONGSADeputy Director General of DPC andDirector of NIU

Registered Office Ministry of Industry and CommercePhonexay Road, P.O. Box 4107

'Vientiane Capital, Lao PDR

Auditors KPMG Lao Co., Ltd.

Ministry of Industry and CommerceD r, eturnznt Department of Planning and Cooperation


Statement of Management's Responsibilities

It is the responsibility of management to prepare financial statements of the Small and MediumEnterprise Access to Finance Project ("the Project") for the year ended 30 September 2016, which areprepared in all material respect in accordance with the accounting policies as described in Note 2 tothe financial statements. In preparing these financial statements, management is required to:

* Select suitable accounting policies and apply them consistently;

* Make judgments and estimates that are reasonable and prudent;

* Maintain financial records and prepare the financial statements based on the accounting policiesas described in Note 2; and

* Prepare the financial statements on the going concern basis unless it is inappropriate to presumethat the Project will continue its operations.

Project Management of Small and Medium Enterprise Access to Finance Project is responsible forkeeping proper accounting records, which disclose with reasonable accuracy, at any time, the financialposition of the Project. Members of project management have a general responsibility for taking suchsteps as are reasonably available to them to safeguard the assets of the Project and to prevent anddetect fraud and other irregularities.

Project Management confirms that the Project has complied with the above requirements in preparingthe financial statements.

On behalf of the management

Phouvieng PHONGSA V Sodavanh SouvannaphoumDeputy Director General NIU ManagerDirector of NIU Department of Planning and CooperationDepartment of Planning and Cooperation Ministry of Industry and CommerceMinistry of Industry and Commerce

Date: 12 APR 2017 Date: 1 2 APR 2017

2

KPMG Lao Co.,Ltd. 49?fni~o#A

3r 4th Floor, 37 K.P. Tower qi1i 3-4, 37 Fn cow-moco23 Singha Road, Ban Phonexay, t%lai 23 Rom, 6u,93lmA:q,Saysettha District, P.O. Box 6978 LJe Ymun, 5 U.. 6978,Vientiane Capital, Lao PDR 3eVeLo5o53J, d OA moTel +856 (21) 454240-7 +856 (21) 454240-7

Independent Auditors' Report

To the Project Management, Small and Medium Enterprise Access to Finance Project

We have audited the accompanying financial statements of the Small and Medium EnterpriseAccess to Finance Project ("SMEA2F" or "the Project"), which comprise the statement ofcash receipts and payments for the year ended 30 September 2016, the statement of thedesignated bank account for the year then ended, and notes, comprising of a summary ofsignificant accounting policies and other explanatory information from page 7 to page 12.The financial statements have been prepared by management based on the accounting policiesas described in Note 2 to the financial statements.

Management's Responsibility for the Financial Statements

Project Management is responsible for the preparation of these financial statements inaccordance with the accounting policies as described in Note 2 to the financial statements,and for such internal control as management determines is necessary to enable the preparationof financial statements that are free from material misstatement, whether due to fraud or error.

Auditors' responsibilityOur responsibility is to express an opinion on these financial statements based on our audit.We conducted our audit in accordance with International Standards on Auditing. Thosestandards require that we comply with ethical requirements and plan and perform the audit toobtain reasonable assurance about whether the financial statements are free from materialmisstatement.

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on our judgement,including the assessment of the risks of material misstatement of the financial statements,whether due to fraud or error. In making those risk assessments, we consider internal controlrelevant to the entity's preparation of the financial statements in order to design auditprocedures that are appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the entity's internal control. An audit also includes evaluatingthe appropriateness of accounting policies used and the reasonableness of accountingestimates made by management, as well as evaluating the overall presentation of the financialstatements.

We believe that the audit evidence we have obtained is sufficient and appropriate to providea basis for our audit opinion.

KPMG Lao Co-, Ltd a Company licensed under the Foreign Investment Law of Lao PDR, isa memberof KPMG International, a Swiss cooperative

OpinionIn our opinion, the financial statements of the Project for the year ended 30 September 2016are prepared, in all material respects, in accordance with the accounting policies as describedin Note 2.

Basis of Accounting and Restriction on UseWithout modifying our opinion, we draw attention to Note 2 to the financial statements,which describes the basis of accounting. The financial statements are prepared to provideinformation to the Project Management of Small and Medium Enterprise Access to FinanceProject to report to the donor IDA. As a result, the financial statements may not be suitablefor another purpose. Our report is intended solely for the Project management and the donorIDA and should not be used by parties other than the Project management and the donor IDA.

PMG LAOKPMG Lao CTVientiane Capital,

Date: 12 APR 2017

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KPMG Lao Co, Ltd, a Company licensed under the Foreign Investment Law of Lao PDR, is a member of KPMG International, a Swiss cooperative


Statement of cash receipts and paymentsFor the year and period ended 30 September

15 September2014 to

30 September 30 SeptemberNote 2016 2015

USD USD

Receipts 3 4,463,770 1,021,393

PaymentsLine of credit to Participating FinancialInstitutions ("PFIs") 4 4,000,000 -Technical Assistance 5 470,096 72,808

Total Payments 4,470,096 72,808Excess of receipts over payments (6,326) 948,585Fund balance at the beginning of the year/period 948,585Fund balance at the end of the year/period 942,259 948,585

Represented by:

Cash on hand and cash at bank 6 939,920 948,011Advance 2,339 574

942,259 948,585

Phouvieng PHONGSA Sodavanh SouvannaphoumDeputy Director General NIU ManagerDirector of NIU Department of Planning and CooperationDepartment of Planning and Cooperation Ministry of Industry and Commerce

Ministry of Industry and Commerce

Date: 1 2 APR 2017 Date: 1 2 APR 2017

5


Statement of designated bank accountYear ended 30 September 2016

15 September2014 to

30 September 30 SeptemberNote 2016 2015

USD USD

Receipts 3 4,463,770 1,021,393

Payments

Line of credit to PFIs 5 (4,000,000) -

Payments made out of project's accounts 4 (470,096) (72,808)Increase of cash at project's operatingaccounts 6 (38,219) (26,450)Increase in advance (1,765) (574)Decrease/(Increase) of cash on hand 6 83 (200)

(4,509,997) (100,032)Excess of receipts over payments (46,227) 921,361Fund balance at the beginning of period 921,361 -

Fund balance at the end of theyear/period 875,134 921,361

Represented by:

Cash at designed bank account 6 875,134 921,361

Phouvieng PHONGSA Sodavanh SouvannaphoumDeputy Director General NIU ManagerDirector of NIU Department of Planning and CooperationDepartment of Planning and Cooperation Ministry of Industry and CommerceMinistry of Industry and Commerce

Date: 1 2 APR 2017 Date: T2 APR 2017

6


Notes to the financial statementsYear ended 30 September 2016

These notes form an integral part of, and should be read in conjunction with, the accompanyingfinancial statements.

1. Principal activities

The Small and Medium Enterprise Access to Finance Project ("the Project") is supported by theInternational Development Association ("IDA") of the World Bank under Contract Credit No.5471 -LA and Grant No. H958-LA; (dated 14 August 2014 and amendments to the financial agreement dated24 November 2016), which is implemented by the Ministry of Industry and Commerce ("MoIC") LaoPDR.

The objective of the Project is to provide long-term funding sources for banks to provide long-termcredit to Small and Medium Enterprises ("SMEs").

The project consists of the following parts:

Part 1: Line of Credit Facility

Provision of a line of credit facility to Participating Financial Institution ("PFI") for extending long-term local currency loans to SMEs for the implementation of Specific investment sub-projects.

Part 2: Technical Assistance

2.1 Provision of technical assistance to Department of Small and Medium Enterprise Promotion("DOSMEP") and other relevant agencies to strengthen their capacity to formulate andimplement strategies, policies, investments and other activities related to the promotion of SMEs, and to implement, monitor and evaluate the project.

2.2 Provision of technical assistance to Participating Financial Institutions and other relevantfinancial institutions to improve their SME banking strategies, products and practices, includingtheir compliance with environmental social due diligence and safeguard requirements.

2.3 Provision of technical assistance to SMEs to build their capacity in business developmentand administration and financial management.

The main activities of the Project in the period are set out in the comparison of budget and actualexpenditure.

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Notes to the financial statements (continued)Year ended 30 September 2016

2. Summary of significant accounting policies

The following significant accounting policies have been adopted by the Project in the preparation ofthese financial statements:

a) Basis of financial statements preparation

The financial statements of the Project consist of the statement of cash receipts and payments andstatement of designated bank account, which is expressed in United States Dollars ("USD"), has beenprepared in accordance with the cash modified basis of accounting. The accounting policies havebeen applied consistently throughout the period.

b) Fixed assets

All purchases of fixed assets are recorded as payments in the statement of cash receipts and paymentsupon acquisition. The Project maintains a Fixed Assets Register for control purposes.

c) Cash

Cash comprises cash on hand and balances with banks.

d) Foreign exchange

The Project maintains its accounting records in USD in accordance with the grant agreement. Allcash is held in USD. Transactions in currencies other than USD during the period have beentranslated into USD at rates approximating those ruling at the transaction dates. All exchangedifferences are recorded in the statement of cash receipts and payments.

e) Accounting reporting period

The financial accounting year of Government of Lao PDR starts on 1 October and ends on 30September. During the current year, Government of Lao PDR announced a new financial accountingyear starts on 1 January and ends on 31 December which is effective for fiscal years beginning on orafter 1 January 2017.

f) Comparison of budget and actual payments

The approved budget is developed on the same accounting basis, same classification basis and forthe same period as for the financial statements.

g) Receipt recognition

Fund receipt from IDA is recognised as receipt when cash is credited to the project's designatedaccount. The IDA may make direct payments, at the Project's request, directly to a third party foreligible expenditures.

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h) Payment recognition

Payments incurred in the frame work of the Grant Agreement are recognised on the cash basis ofaccounting, i.e. when the payments are made.

Categories ofpayments

I Consultants' Services, Non-Consultant services; Training and workshop, IncrementalOperating Costs and Goods

The reasonable costs of goods and non-consulting services required or the day to daycoordination, administration and supervision of project, including leasing and/or routine repairand maintenance of vehicles, equipment, facilities and office premises, fuel, office supplies,utilities, consumables, communication expenses (including postage, telephone and internetcosts), translation, printing and photocopying expenses, bank charges, publications andadvertising expense, insurance, Project-related meeting expense, Project - related travel,subsistence and lodging expenses , and other administrative costs directly related to the project,but excluding salaries, bonuses, fee and honoraria or equivalent payments of members of therecipient's civil service.

I. Direct payments

The IDA may make direct payments, at the Project's request, directly to athird party for eligibleexpenditures.

III. Line of credit to Participating Financial Institutions ("PFIs")

Line of credit facility is provided under the financing agreement for the Small and MediumEnterprise ("SME") to provide loans to small and medium-scale borrowers for expanding theirproduction activities and employment.

i) Advances

Advances, for activities such as workshops, conferences, monitoring trips, are reimbursable to theproject until expensed by the Implementing Agencies ("IA"). Advances are recognized as expenditureafter the advance has been liquidated and the expenses reports are approved. Advances are requestedby IA from the Project through formal advance request forms.

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3. Receipts

15 September2014 to

Reference 30 September 30 SeptemberNo: Description 2016 2015

USD USD

01/A2F-CRE Fund Received from WB 2,000,000 -

05/A2F-GRA Fund Received from WB 1,500,000 500,000

06/A2F-GRA Fund Received from WB 668,589 500,000

04/A2F-GRA Fund Received from WB 217,606 21,393

07/A2F-GRA Fund Received from WB 77,575 -

4,463,770 1,021,393

4. Line of credit to Participating Financial Institutions

15 September2014 to

30 September 30 September2015 2015USD USD

Line credit to PFIs (ST bank) 2,000,000

Line credit to PFIs (Lao-China Bank) 2,000,000 -

4,000,000 -

5. Technical Assistance

15 September2014 to

30 September 30 September2016 2015

USD USD

Consultant services

International project advisor 49,392 12,405

National procurement Officer 30,000 -

International procurement advisor 29,443 3,702

National finance Officer 19,767 8,466

International finance specialist 17,100 -

National program Specialist 16,000

Consulting firm 11,220

National Environment & Social Safeguards 11,160

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5. Technical Assistance (continued)

15 September2014 to

30 September 30 September2016 2015

National Project Coordinator 10,000 -

National administrative officer 9,198 3,000

Environment and safeguards expert - 24,610

203,280 52,183

Training and workshop

DSA 10,535 255

Transport Cost 9,568 -

Conference, Convention, Meeting 4,759 8,203

Other related costs 674 -

25,536 8,458

Incremental operating cost

Other expenses 10,686 1,758

Supplies 5,685 3,108

Driver SMEA2F 4,500 -

Advertisement 4,429 1,533

Communication 1,739 1,002

Books, Subscriptions, Reference 1,217 81

Fuel for office work 423 509

Printing and Copying 379 361

Bank Charges 146 75

29,204 8,427

Goods

Project Vehicle 139,028 -

Office Equipment 45,573 3,740

Office furniture 27,475 -

212,076 3,740

470,096 72,808

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6. Cash on hand and cash at bank

15 September2014 to

30 September 30 September2015 2015USD USD

Designated bank account: Bank of Lao 875,134 921,361

Operating bank account: Lao Viet Bank 64,669 26,450

Petty cash 117 200

939,920 948,011

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Budget and actualpaymentsYear ended 30 September 2016 (Appendix 1)

Analysis of variances between budget and actual payments (Not audited)

Most activities were under spent during the period from I October 2015 to 30 September 2016.

As a result during the period a work plan was prepared but the nature of the work plan included onlyactivities for the component 2 "Technical Assistance", but not include all budgets which shall beincurred in the period, such as no budget for Component I " Line of Credit", no budget for all existingconsultants cost (contract signed with the project) and other operating costs. Due the existing work planwas not suitable for implementation of the project, therefore, the project management with consultationof project advisors formulated and prepared a new six months work plan cover the period from July toDecember 2016 and was approved by the World Bank on 12 September 2016.

The actual expenditure of the project shown in the above has been recorded in line with the work planand activities approved.

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Documents

APR 2017 Public Disclosure Authorized RECEIVEDdocuments.worldbank.org/curated/en/... · Ministry of Industry and Commerce Date: 12 APR 2017 Date: 1 2 APR 2017 2. KPMG Lao Co.,Ltd