FINANCIAL ATTEST AUDIT REPORT

ON THE ACCOUNTS OF

STRENGTHENING OF MARKETS FORAGRICULUTURE AND RURAL TRANSFORMATION IN

PUNJAB PROGRAM

WORLD BANK (8809-PK)

PLANNING AND DEVELOPMENT DEPARTMENT,

GOVERNMENT OF THE PUNJAB

FOR THE FINANCIAL YEAR 2017-18

AUDITOR GENERAL OF PAKISTAN ISLAMABAD

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TABLE OF CONTENTS

PageList of abbreviations 2

Preface 3

PART-I 4

Project Overview 5

Auditor's Report to the Management (Audit Opinion) 6

Financial Statements 7

PART-ll 8

MANAGEMENT LETTER 9

COVERING LETTER TO THE MANAGEMENT LETTER 10

EXECUTIVE SUMMARY II

1. Introduction 13

2. Audit Objectives 13

3. Audit Scope and Methodology 13

4. AUDIT FINDINGS AND RECOMMENDATIONS 13-32

4.1 Organization and Management

4.2 Financial Management

4.3 Procurement and Contracting

4.4 Overall Assessment 33

5. CONCLUSION 34

ACKNOWLEDGEMENT 35

1

Abbreviations and Acronyms

AG Accountant General

DG Director General

[)L1 Disbursement Linked Indicators

ECNEC Executive Committee of the National Economic Council

EPD Environment Protection Department

GoPb Government of the Punjab

INTOSAI International Organization of Supreme Audit Institutions

IPSAS International Public sector Accounting Standards

ISSAl International Standards of Supreme Audit Institutions

LO Lahore (Cost Centers)

MoU Memorandum of Understanding

MTDF Medium Term Development Framework

PAD Project Appraisal Document

PC-I Planning Commission Form no.1

PFR Punjab Financial Rules

PlU Project Implementation Unit

PRMP Punjab Resource Management Program

SDAC Special Departmental Accounts Committee

SMART Strengthening of Markets for Agriculture and Rural Markets in Punjab Program

2

PREFACE

The Auditor General of Pakistan conducts audit. subject to Articles 169 and 170(2) of the

Constitution of the Islamic Republic of Pakistan, 1973, read with Sections 7, 8 & 12 of the

Auditor General's (Functions, Powers and Terms & Conditions of Service) Ordinance. 2001.

Audit of Financial Statements for the financial year 2017-18 was carried out accordingly of theStrengthening of Markets for Agriculture and Rural Transformation in Punjah Program

(SMART) financed by Government of the Punjab and the World Bank.

The Directorate General Audit, Punjab Lahore conducted audit of the Financial

Statements of SMART during July and October, 2018 for the financial year 2017-18 with a view

to reporting significant findings to stakebolders. Audit examined the economy. efficiency and

effectiveness aspects of the SMART. In addition, audit also assessed, on test check hasis,

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

entity. The audit report indicates specific actions that, if taken, will help the management realize

the intended objectives. The report has been discussed with the SMART Management in July

and November, 2018.

The report consists of two parts i.e. Part-1 contains Auditor's Report (Audit Opinion) and

Financial Statements and Part-1l consists of Executive Summary, Management Letter and Audit

Findings.

The report has been prepared for submission to the World Bank in terms of agreement.

(Fareed Mahmood Ch.)

Director General Audit,

2 DEC' ?Q1b Punjab, Lahore

Dated: tt LUPlace: Lahore.

3

PART-I

1- Project Overview

2- Auditor's Report to the Management

3- Financial Statements

4

PROJECT OVERVIEW

Name of the Project Strengthening of Markets for Agriculture and Rural

Transformation in Punjab Program (SMART)

Sponsoring Authority World Bank

Executing Agency Project Implementation Unit (PIU)

Loan No. 8809-PK

Principal Loan Amount US $ 300 million

Date of Commencement February. 2018

Actual Date of Commencement: February, 2018

Date of Completion: 30-06-2023

Expenditure Status:

Amount utilized during

2017-18 (Rs.)

Rs. 9.288.427 million

5

AUDITOR'S REPORT

Auditor's Report on SMART Financial Statements

We have audited the accompanying Financial Statements of SMART that comprise of

Statement of Receipts and Payments, Statement of Comparison of Budget and Actual together

with the notes forming part thereof for the year ended 3 0"' June, 2018.

Management's Responsibility

It is the responsibility of Project Management to establish and maintain a system of

internal control, and prepare and present the Statement of Receipts and Payments in conformity

with the requirements of Cash Basis IPSAS, Financial Reporting under the Cash Basis of

Accounting Standard.

Auditor's Responsibility

The responsibility of the auditor is to express an opinion on the Financial Statements

based on the audit conducted. We conducted our audit in accordance with International

Standards of Supreme Audit Institutions. Those standards require that we plan and perform the

audit to obtain reasonable assurance whether the Financial Statements are free of material

misstatements. The audit process includes, examining on a test basis, evidence supporting the

amounts and disclosures in the Financial Statements. It also includes assessing the accounting

principles used and significant estimates made by management, as well as evaluating the overall

statement 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 3 0 h June, 2018 in accordance with IPSAS

Cash Basis of Accounting Standard.

(b) The expenditure has been incurred in accordance with the requirements of legal

agreement.

Place: Lahore

Dated: i(Fareed Mahmood Ch.)

Director General

Audit, Punjab, Lahore

6

FINANCIAL STATEMENTS

FOR THE YEAR ENDED ON 30"'JUNE, 2018

7

StrengthenIng Markets For Agriculture And Rural Transformation (SMART) ProgramLoan No, ao09-PK

Statement of Cash Receipts and PaymentsFor the Year Ended June 30, 2018

Amount In Pak Rupees Amount in Pak RupeesNote 2017-2018 2016-2017

Receiptel Payment Receiptsf PaymentPayments under by Third Payments by Third

Program Parties under Program Parties

RECEIPTSGovernment of lhe Punjab 5 9.288.427072Elernal AsisLance 6l6.1 -

TOTAL RECEIPTS 9,280,427,072

PAYMENTSGovernment of the Punjab

Target Departments and lAs

Livestock & Dairy DevelopmentDepartment:-Reh & Mech of Govt.Liveslock Farms LZ4101 45.956.000 -HA N/AEnhancing 9eep Produclion-Phase It LZ4101 178,538.000 N/A NIAForest & Cultivation Of Country Medical LZ4101 8.173,000 - N/A NIAPlants

Livestock Census Punjab MultipCe,List 76,415,999 N/A N/AAttachedMultipleL1-st 1.701,068,074 W/A NIA

Poverty Alleviation of Poor Woman Punjab Attached

Enhan. Of Livestock Production & Multiple,List 1.339,454.879 N/A N/AProductivity Attached

Improving the Production Performance LZ4806 12.108,527 - N/A N/A

Enhancing Competitiveness of Livestock Multiple,List 143,420.000 N/A N/AProduction System AttachedEstablishment of UnIv V&A LZ4567 743079,013 N/A N/ASciericeBhawalpurEstof Training Centre IUVAS, Ravi LZ4567 129.896,846 N/A N/ACampus PaltokiLZ57 198646NA W

Est.of Para Vetennary School, Narowal LZ4507 80,116,043 N/A N/AProv.of Academic Block,Hostei & Faculty LZ4567 218,449,294 NIA NAApartments, City Campus, UVAS Lahore

Development of Ostrich Farming in Punjab LZ4567 28.404.602 N/A N/A

Propagation of Ducks Rearing in Punjab LZ4567 22,028,763 - N/A N/ADevelopment of Camel Milk Value Chain LZ4567 14,398.341 N/A N/AEstablishment of Export Centre forLivestock & Poultry Industry at UVAS, LZ4567 26.975.147 N/A N/ALahoreTraining Facility of Ad v. Veterinary LZ4567 57.522,392 N/A N/AEducationAcquisition of Land for Para VeterinarySchool & College of Vet & Ani Scienece LZ4567 250,000,000 N/A N/ANarowalSub-Total 5,074,005,920Irrigation Department:- N/A N/AA134D1 Main Canal BR4201 24,885,245 N/A N/AA13401 Main Canal DG4171 377 591.000 N/A NIAA13401 Main Canal MH4002 39.990.252 N/A N/AA13401 Main Canal MH4003 66.046.423 N/A N/A

A13401 Main Canal MH4004 50 993,565 N/A N/AA13401 Main Canal JG4068 10.896.879 N/A N/AA13401 Main Canal JG4067 8,258.474 N/A N/AA13401 Main Canal GT4003 14.063.558 N/A NIAA13401 Main Canal JM4013 11.917.424 N/A N/ASub-Total 604,642,020

TOTAL PAYMENTS -Increase/ (Decrease) in Cash -Cash at BeginnIng of Year - - -

Cash at End of Year

The accompanying noles form an integral part of these financial statements.Amounts mentioned above have been reported by respective IA and TO to PlU through submission of

Consolidated Reconciled Expenditure Reports for FY 2017-18

Program DirectorProgram Implementation Unit

Audit Officer Financial Management SpecialistDirectorate General Audit Program Implementation Unit

Page 112

Strogtlhonlng Markets For Agriculture And Runl Traneformetion (SMART) ProgramLoan No. 8809-PK

Statement o Cash Receipts and PaymentsFor the Year Ended June 30. 2012

Amount In Pak Rupee Amount Is Pak RupeesNote 2017.201n 2016-2017

Reocipat Payment Recelpts) PaymentPayments under by Thir Paymeris by Third

Program Parties under Program Parties

Government of the Puqjmb 9 9 , 7External Asistance ei., -W|IW

TOTAL RECEIPTS 92115,427.072 - -

PAYMENTGovernment of the PunjabTarget Departments arid lAs

AgrJICuius Department!-Intro & Adap of HV Crops & Fruits CH4436 4 225.88 NA N/Aimprovementof Production Technology FS4044 10.534,170 N/A NAin Gartic and GingerDivraIlflcatlon to High Value Cropping Multiple.Lst 19.654.559 NA NAthrough Promotion of Horliculture AnachedProduction of pre-boasicbasoc virus tieseed of the approved poIat S54287 9005.125 WSA W/Avarietylvarieties through tissue curureDevelopment Of IntegratedManagement Of Citrus Orchards To Muliple,Lit 3,979,6N NEnhance The Yield And Improvement Attached WA NAOf Fruit Duality

Developing Patinver Into an live CH4436 190.641269 WA NA

Up-giradaion of AARI Infrstructure, FS4549 4.% 5DD NSA NIAFaisalaoadEvotMtion at Sorghum aS Corngenotypes sor the produchon al S0434 t 2.142581 NA NSAconserved loddersimprovemnt irt mreading and seed LE4257 13,45879 - NUA NAProduLim System cit ladder CrOsimprovement in reediig and seed LE4249 20 t80 096produlion system of fodder cropsProvision of lab and field equipment forDevelopment of Besmatl Rice Hybrid SE4427 7762,979 NfA NiAResistant to Batlteria Leaf Bilght. Floodand Sainiry in PunjabAccredtaion of AARI labtoratores for Multiple.Lst 23.159.000 NSA NSAISO-17025 AtlachedCommissioned Research ft Multiple.Li51 94.01(,000 NSA NSAdevelopmentof Cotton Seed AltachedProvision of Additional ResearchFacilites for Developmenit f Heat Multiple,List 7.l20.359 NSA NAResilient Maize Hybirids at Maize & AttachedMillets Research InituteTestlng Indlgerous HydroponicGreenhouses for Vegetable Growing at R84530 74,602,000 iA NAvarious Localions in PunjabPilot project crop Irsurrance LO17010226 82,695 000 NIA NrAPromotion or Pulses Cultivalion in LZ4793 6.413 000 NiA NWA

Support pnce foi tI Seed Crop LD17010219 593.850 000 NWA Ni'AAward sctene for estL17010221 30.359 000 NA NACoitton, Rice, & HoMcultute Crops L07121 a.500WA N'

Establishinnt of Model Farms Linkedwith mproved Supply Chain $ Value L24867 139 780 000AdditionOptilmizrig Watercourse ConveyanceEtficiency through enhancing Lining Lo150D2O3B 1 223,096.000 NSA NSALengthPromotion of High Value Agriculturethrough Proviion of Climato smart L016DD7047 895.919.000 NSA NSATectioloy PackageRainwater management in Cotton hde L16007050 12.030.000 WA NAto Minimize impacts of climate changePromotion of gran cuitivailon hiroughife saving irrigatlain and Sprinkler L017007440 34,295,5DD WA NSAsystem under climate changetagement ao it fl LO14000367 59,405,5115t NA NIAreterence to erin-covitentional methods LOld037 5.s.rSubTiotl 3,552.525.814Program Implementatio UnI(PiU) LZ018 r 57.252,438 NfA NIASub-Total 57252.433TOTAL PAYMENTS 9.211,427.072 - -

Increasel [Decrease in CashCesh at Begineing at Year.- -Cashat End ofYesr- .- -

The accompanying notes form an inlegial parl of these fieancial Statements.Amourds mentioned above Pave been reported by respective IA end TO to PIlU through submissicn ofConsotlidated Reconciled Expendilure Reports for FY 207 18

Program DirectorProgram Implementatian Unit

Adalffi Finandial Management Specialist

Directorate Generat Audit Program Implameotlai Unit

Page 2012

Strengthening Markets For Agriculture And Rural Transformation (SMART) ProgramLoan No. 5809-PK

Statement of Budgeted and Actual Amount

For the Year Ended June 30. 2018

Amount in Pak Rupees Amount in Pak Rupees2017-1a 2016-17

Revised Estimale Revised Esil matesFund Centre 2017-1S Budgeted Actual Amaunt 2016-171 Budgeted Actual Amount

Amount Amount

RECIPISGovernment of the Punjab 9,6a9.124.5B7 9427072 W WExtmalAsistance

TOTAL RECEIPTS 9,669,924,587 9,288,427,072 -

PAYMENT

Government of the Punjab

Target Depts and IAs

Livestock & Dairy Development Department:-Rah & Mach of Govt.Livestock Farms LZ4101 52.645 312 45.956,000 N/A N/A

Enhancing Seep Production-Phase II LZ4101 183744 000 178,538,000 N/A N/AForest & Cultivation Of Country Medical Plants LZd101 8,444000 8,173 000 N/A N/ALivestock Census Punjab Multiple,List Attached 102,767000 76.415.999 N/A N/APoverty Alleviation of Poor Woman Punjab Multple,List Attached 1.712723,449 1.701.068.074 NA N/AEnhan. Of Livestock Production & Productivity Muliple,List Attached 1.359.329 846 1,339,44 879 N/A N/A

Improving the Producton Performance LZ4606 13,225000 12,108,527 N/A N/A

Enhancing Competitiveness of Livestock Multple,List Attached 143 420 000 143.420.000 N/A N/AProduction SystemEstablishment of Univ V&A Science,BhawalPur LZ467 756.150 000 743 079,013 N/A N/AEst of Trairnng Centre UVAS, Ravi Campus LZ4567 131.542000 129.896846 N/A N/A

Est of Para Veterinary School, Narowal LZ467 93.171 000 80116 043 N/A N/A

PrDy Of Academic cHosel LZ4567 217.242 216449294 N/A N/AApartments City Campus, UVAS Labore 751 1.400 28495

Development of Ostrich Fanning in Punjab LZ4567 28,746 000 28 404 602 N/A N/A

Propagaeon of Ducks Rearing in Punjab LZ4567 22 030 000 22,028,763 N/A N/A

Development of Camel Milk Value Chan LZ4567 15,145000 14398341 N/A N/A

Establishment of Export Centre for Livestock & LZ4567 30.0000 26976147 N/A N/APoultry Industry at UVAS, Lahore

Training Facility of Adv.Vetermary Education LZ467 60,000 000 57,522 392 N/A N/A

Acquisitin cF Land For Parae Vetennary School & LZ4567 250.000 000 250,000 000 N/A N/ACollege of Vet& AN nienece Narowial

Sub-Total 5,170,324,407 5,074.005.920

Irrigation Department;-

A13401 Main Canal BR4201 24,885 245 24.885,245 N/A N/A

A13401 Main Canal DG4171 377.501.000 377.591 000 N/A N/A

A13401 Man Canal MH4002 39,990 252 39.990 252 N/A hA

A13401 Main Canal MH4003 06.046.423 66,046.423 N/A NvA

A13401 Main Canal MH4004 50,993.568 50.993.586 N/A WA

A13401 Main Canal JG4068 10,896.879 10,896,879 N/A NoA

A13401 Main Canal JG4C67 5.259.474 8,258.474 N/A N/A

A13401 Main Canal GT4003 14,063.558 14,063.558 iA N/A

A13401 Main Canal J44013 11.917.424 11,917,424 iA N/A

Sub-Total 604,642,820 604,642.820 iA N/A

* The accormpanying notes form an integral part oli thse financial statements.Arnouns mentioned above have been reparted by respective IA and TD to PlU through submisslon of Consolidated Reconciled ExpenditureReports for FY 2017-16

Program DirctorProgram Implementation Unit Nr

Audit Officer Financial Management SpecialistDirectorate General Audit Program implementation Unit

Page 1/2

Strengthening Markets For Agriculture And Rural Transformation (SMART) Program

Loan No. 8809-PK

Statement of Budgeted and Actual AmountFor the Year Ended June 30, 2018

Amount In Pak Rupees Amount in Pak Rupees2017 18 2016-17

Revised Estimates Revised EstimatesFund Contre 2017-18 Budgeted Actual Amount 201-17f Budgeted Actual Amount

Amount AmountRECFJPTSGovernment of the Punjab 9 689,924,57 9,288,427,072-Exlemal Asistance ITOTAL RECEIPTS 9,669924,587 9 288427 072

PAYMQ,4T5Government of ihe PunjabTarget Depts and IAs

Agriculture Department:-Intro & Adap of HV Crops & Fruits CH4436 4 235,100 4.225,685 N/A N/AImprovement of Production Technology in Garlic F$4044 10 608,000 10,534.170 N/A N/Aarid GinnerDiversfcalion to High Value Cropping through Multiple,ListAttached 69.057,000 19.654,559 N/A N/APromotion ol HorticultureProduction of pre-basicfrasic virus free seed ofle approved polato varietylvarieties through SS4287 1 638.000 804.825 N/A N/Aissue culture

Development Of Integrated Management OfCilfus Orchards To Enhance The Yield And Multiple,List Attached 4 013.000 3.979.566 N/A N/AImprovement Of Fruit Qualiy

Developing Pothvar ito an Olive Valley CH4436 192110.260 190.641.259 N/A N/A

lip-gradation of AARI inirastructure Faisalabad FS4549 5 000.000 4.996,500 N/A N/A

Evolution ot Sorghum and Com genotypes for the 504341 2166,000 2.142,581 N/A N/Aproduction of conserved foddersimprovement n Breeding and seed produlion LE4267 16.554.00 13.456.679 N/A N/Asystem ottfodder cropsimprovement n Breeding and seed produion LE4249 21 638.000 20.860.996system of fodder cropsProvision of lab and field equipment forDevelopment of Basmati Rice Hybrid Resistant to SE4427 8 740.000 7.762.979 N/A N/ARamprial I vAf Rimht Flae And Ralinity in P,inlqh

Accreditation of AARI laboralones for ISO-17025 Mutliple,Usi Attached 29993,000 23,158,000 N/A N/A

Commisioned Reseach, for development of Mulliple,Lisl Attached 100 000,000 94,010,000 N/A N/ACotton SeedProvtsion of Additiona Research Facilities forDevelopment of Heat Reslent Maize Hybnds at Mulliple,LsI Attached 7 89 000 7.28.359 N/A N/AMaize & Milliet Research Inslitute

Testng Indigenous Hydroponic Greenhouses for RS4530 77,571,000 74,602,000 N/A N/AVegetable Growng at vanous Locaians in Punjab

Pilot projeci crop Insurrance LO17010226 168,288000 82,685,000 N/A N/A

Promotion df Pulses Cultivation in Punjab LZ4793 6.639 000 6.413.000 N/A N/A

Support price for oilseed crop LO17010218 671.622.000 593,660 000 N/A N/A

Award scheme Fr best growers of Colton, Rice, & L017010221 42,529,000 30,358000 N/A N/AHortoculture Crops

Establishment of Model Farms Linked with LZ4867 136,229000 135.780.000 N/A N/AImproved Supply Chain & Value Addition

Opimiztng Watercourse Conveyance Effic4ency LO15002036 1.243.431.000 1.223.06.000 NIA N/Athrough enhancing Lining Len gthi

Promotion of High Value Agnulare oh L1607047 904401,000 895,919000 IA NIAProvision ofiCimate Smart Technology Package L057074.0.00 65100//A4A

Rainwater management in cotton fields to L016007050 12.326.000 12.030 000 N/A N/AMinimize impacts oftclimate chanePromotion of gram cultivation through life savingirrigation and sprinkler system under climate L017007440 36,638,000 34 298 000 hIA N/AchanceManagement ofruit fly with special relerence to L014000367 61,642,000 59408516 NIA N/Anrii-convertuonial methods

Sub-Total 3.834,557,360 3 552,5594

Program implementation UnitIPIUI LZ4918 60.000,000 57.252 438 N/A WA

Sub-Total 60,000,000 57,212431

Grand-Total 9,669,924 587 _,280 427 072 - -

* The accompanying notes form an integral part of these financial statements.Amounts mentioned above have been reported by respective 1A and TD to PIU through soussion of Consolidated Reconciled ExpenditureReports for FY 2017-18

Program DirectorProgram Implementatlon Unit

Aut Financial Management SpecialistDirectorate General Audit Program Implementation Unit

Page 22

Strengthening Markets For Agriculture And Rural Transformation (SMART) Programloan No. 8809-PK

Notes to the Financial StatementsFor the Year Ended June 30, 2018

1 Program (SMART) Description

1.1 IntroductionThe Financial Statements are for Strengthening Markets for Agnculture and Rural Transformation (SMART) Program,The financial statements encompasses the reporting entity as defined in the Financing Agreements between the IslamicRepublic of Pakistan and the World Bank for the program The total funding of SMART program is USD 300 million (LoanNo 8809-PK) over five years which has been linked with achievement of agreed Disbursement Linked Indicators (DLIs).The first year of SMART Program has started as the loan became effective in the month of February. 2018

1.2 Program ObjectivesStrengthening Markets for Agriculture and Rural Transformation (SMART) Program will support the selected parts of thebroader government's program for agriculture and rural transformation which emphasizes enabling productivity,increasing competitiveness in agricultural marketing and trade, and enhancing resilience Program Implementation Unit(PIU) is responsible for overall program coordination. The financing instrument used for this Program is Performance forResults (PforR), which is already used in J&C Program PforR instrument supports government's existing programs andsystems.

1.3 Program ScopeThe disbursement is linked with achievement of certain agreed results called Disbursement Linked Results (DLRs) anddisbursement is made directly to Finance Department after submission of report validated by third party firm. There is no"Eligible Expenditure Program (EEP) in this instrument, However, an "Expenditure Framework (EF)" has been preparedwhich may be viewed in the Program Appraisal Document (PAD), wherein, some selective cost centers IDDOcodes/expenditure themes (both from current and development side) of target departments and implementing agencieshave been included on the basis of five year expenditure projections Accountant General Punjab makes payments andmaintain accounting records of cost centers/DDO codes mentioned in EF using the government financial managementinformation system/PIFRA System

1.4 Estimated CostThe Program is planned over five years with disbursements up to a maximum of US 300 million equivalent over this time.

1,5 Sources of Finance1 World Bank2. Government of the Punjab

1.6 Components of SMART ProgramStrengthening Markets for Agriculture and Rural Transformation (SMART) Program will support the selected parts of thebroader governments program for agriculture and rural transformation which emphasizes enabling productivity,increasing competitiveness in agricultural marketing and trade. and enhancing resilience SMART is a program funded bythe World Bank under lending instrument of Program for Results (P4R) P4R's unique features include using a country'sown institutions and processes, and linking disbursement of funds directly to the achievement o specific program results

2 Certification by Project Management on Application of Fundst Management Assertion :Funds against IBRO Credit No. 8809-PK have been utilized for the project purposes as defined in the financingagreement.

3 Accounting Convention and Statement of ComplianceThe Financial Statements of SMART program have been prepared in accordance with Cash Basis InternationaJ PublicSector Accounting Standards (IPSAS), Financial Reporting under the Cash Basis of Accounting. These financialstatements have been prepared using cash basis o accounting where transactions are only recognized when cash isreceived or paid.

4 Significant Accounting Policies:

4.1 Foreign Currency TransactionCash receipts and payments arising from transactions in foreign currency are recorded in Pak Rupees by applying theaxchange rate prevailing at the date of transactions.

4.2 Reporting Currency :All amounts in the financial statements are in Pak Rupees.

4.3 Revenue Recognition :Revenue is recognized on the date of receipt of money by bank or clearance of cheque Revenue is recognized on grossbasis 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 paymentspertain is determined by the date on which a cheque or payment advice is issued

4.5 Basis of PresentationThe financial statement has been prepared in accordance with International Public Sector Accounting Standard (IPSAS)cash basis

4.6 Accounting ConventionThese financial statements have been prepared under the historical cost convention with cash basis of accountingAccordingly, expenses are recognized when paid rather incurred.

4.7 Foreign Currency TransactionsAll transactions have been made in Pak. Rupees

4.8 Fixed AssetsFixed Assets are disclosed on Historical Cost Basis. Schedule of Fixed Assets has been given

Strengthening Markets For Agriculture And Rural Transformation (SMART) Programloan No. 8809-PK

Notes to the Financial StatementsFor the Year Ended June 30, 2018

5 Receipts - Government of the Punjab :This represents the funds provided by Government of the Punjab to pay for the program for the period July 01, 2017to June 30, 2018 amouinting to PKR 9.288 Million

6 External Assistance:

6.1 No external assistance was disbursed directly to SMART agencies during the financial year. However, an amount of USD43 million approximately was disbursed to Finance Department directly as budgetary support in FY 2017-18 as USD 30million advance payment for SMART Program and USD 13 million against DLIs' achivement The amount however, cannot be reflected against the external assistance column under PforR instrument and will be treated as separate amountirrespective of the program Whereas, funding to all implementing agencies and Larget departments will be provided fromGOPb funds as per government's rules and procedures.

Funding Mechanism:The lending instrument under SMART Program is Performance for Results (PforR) PforR supports government's ownsystems and existing programs. As far as funding of the program is concerned, as mentioned in Program AppraisalDocument (PAD), program funding will be included in the provincial annual budget following the regular budget cycle andall funding will flow through treasury budget line. Whereas, each Implementing Agency (IA) will maintain its own books ofaccounts for program related activities on cash basis, using the government's accounting policies and procedures Thefigures mentioned in the financial statements have been reported by respective Implementing Agencies and TargetDepartments to PlU through submission of consolidated reconciled expenditure reports for FY 2017-18 and through AGOffice's PIFRA financial system clarified/duly reconciled with AG/Treasury Offices by respective lAs and TDs whereas,PlU has compiled the same figures in form of financial statements for FY 2017-18.

Implementing Agencies are Targeted Departments:There are a total of 04 implementing agencies and targeted departments. As provided in PAD, all implementing agenciesand target departments are getting funding in their respective regular budget line from Finance Department in the agreedDDO codesILOs as agreed in the Expenditure Framework both from development and current side The Program fundingto all IAs and TDs comes from Government of Punjab only whereas World Bank releases the loan amount directly toFinance Department as budgetary support subject to achievement of agreed DLRs duly validated by third party firmSince, in SMART program, funds flow directly from Finance Department through distinct budget lines to IAs and TDs eachhaving their own Drawing and Disbursing Officers (DDOs) and Principal Accounting Officers (PAOs) legally authorized foraccounting controls and audit observations as per government's policies and rules, therefore, expenditures, payments,procurements and other associated activities are the responsibility of these respective entities. It is pertinent to mentionhere that under PforR instrument, World Bank does not provide any funding directly to implementing agencies or targetdepartments and instead the Program is funded by Government of Punjab using its own sources, while on achievementof DLls verified by third party, funds from the World Bank flow to Finance Department as per disbursement framework.

6.2 There has been no instance of non compliance with the terms and conditions of the Financing Agreement between theWorld Bank and GoP whiich have resulted in cancellation of loan.

7 Authorization for Issue :These financial statements have been authorized for issuance by the management of SMART (PIU).

8 General;Figures have been rounded off to the nearest rupee.

9 Payments:PIU received funds from Government of the Punjab through assignment account w1hicb is lapsable.

kogram irectorProgram Implementation Unit

Audit Officer Financial Management SpecialistDirectorate General Audit Program Implementation Unit

Budget & Expenditure Position F.Y 2017-18Program implementation Unit

sr. Desription Budget Consumption Balance % Usage CommentsNo. 2017-tan 2 0718

1 A-05270-to Others 60,000,000 57,252,438 2,747562 95.42% Detail at Annex-ATotal Cost 60,000,000 57,252,438 2,747,562 95.42%

J'I

Annex-A

Expenditure Detail 30th June, 2018

PROGRAM IMPLEMENTATION UNIT (PIU)

Budget Head-Sr.# Description A05270- Utilization 2017-18 Remarks(If Any)

Others(2107-18)A B C 1_ E

1 Establishment Cost 11,331,279

2 Honorarium

3 Occupancy & Renovation Cost 4,765,242

4 Vehicles 5,815,000

5 Furniture & Fixture 2,835,904

6 Machinery & Maintenance 8,593,889

7 Operational Expenses 60,000,000 3,716,962

8 Workshops/Trainings 57,560

9 Rates & Taxes -

10 Entertainment 25,400

11 Miscellaneous/Others

12 TA/DA 95,780

13 Consultancies 20,015,422

Total 60,000,000 57,252,438

Reconciliation of Assignment Account(Local Currency)

Assignment Account No.141 malantained with NBP, Main Branch Lahore

Description Pak Rs.

Opening Balance As on 01.072017 Nil

Less: Nil

Add: 60,000,000

Issue Cheque Cancelled Nil

Direct Payments Nil

Surrendered During FY. 2017-18 -

Total 60,000,000

Expenditure for the Year 2017-18 57,252,438

Balance as on 30.06.2018 2,747,562

Anount Lapsed on 30.06.2018 2,747,562

Closing Balance as Per Bank Statement on30.06.2018 Nil

PROGRAM MANAGEMENT UNIT, P&D DEPARTMENT

Cost Centre- LZ4918

Financial Statements for the year Ended June 30, 2018

Schedule of Fixed Asset Assets PIU

Financial Year 2017-18

Category No. LocationFax 1 PIU.P&DServer 1Heavy Duty UPS for Server 1Laptop Computers 14Desktop Systems With LED 4Heavy Duty Laser Jet Printer 1Printers 10Photocopier 1

Scanner 2Air conditioners 9Refrigerator 1Stablizer 2

Generator 1Water Dispensor 2

UPS 2

Digital telephone Exchange 1Telephone Sets 16Attendance Machine 1

Video Conference System 1LED SONY 1Air Cooler 3

Furniture & Fixture

Meeting Room Table ( 13'x3.5') 1 PIU,P&D

Office Chairs ( revolving) 12

Executive Tables (L72"xW36"xH3) 2

Executive Chairs (revolving) 2

Executive Visitors Chairs 4

Office Tables (54"x30"x3) 2

Side Racks (W36"xD16"x H26) 2

Office Chairs ( revolving) 2

Visitor Chairs For Office 4

Office Tables (60"x30"x30) 4

Side Racks (W36"xD16"x H26") 4

Small Shelfs (L 36'xD17"xH50") 4

'Office Chairs (revolving) 4

PROGRAM MANAGEMENT UNIT, P&D DEPARTMENT

. Cost Centre- LZ4918

Financial Statements for the year Ended June 30, 2018

Schedule of Fixed Asset Assets PlU

Financial Year 2017-18Category No. Location

Visitor Chairs For Office 8 PIURP&D

Revolving Office Chairs 6

Reception Desk 9L60"xW24"xH45 1

Reception Office Chair ( revolving 1

Side Rack ( L36"xW 6"xH26") IDouble Sofa ( Leather-rite) 2Single Sofa ( Leather-rite) 3Corner Table (L24"xW24"xH18) 1Round meetin Table (2'x 2) 1

Meeting metal Chairs 4Single Sofa (Leather-rite) 2Corner Table (L24"xW24"xH18) 1Single Sofa ( armless) 4Corner Table (L24"xW24xH18) 2

MS 3 Seater Bench 2L shaped Work Station 4Office Chairs (revolving) 18_