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( -l:--- KERALA RURAL WATER SUPPLY & SANITATION «®3 s AGENCY Alalanidhi Ill Floor, PTC Towers, SS Kovil Road, Thampanoor /Co«mav s smu a sort» sac, Thiruvananthapuram - 695001 Public Disclosure Authorized Phone:2337002,2337003,2337005 Fax:2337004 No:3234/ AC3/KRWSA/2013 01/06/2020 From Director- Finance & Administration KRWSA, Jalanidhi, Trivandrum To Public Disclosure Authorized The Finance Consultant 70,Lodi Estate, World Bank Office New Delhi - 110003 Dear Madam, Sub: Second Kerala RWSS - IDA Cr.No.5027-IN-Jalanidhi Project-Phase II- Audited Financial Statements for the year 2019-20 (01/04/2019 to 31/12/2019) -reg:• Public Disclosure Authorized Enclosed please find the following documents pertaining to the Audited Financial Statements for the year 2019-20 (01/04/2019 to 31/12/2019): 1. Auditor's Report 2. Certified Statement of Accounts Public Disclosure Authorized Yours Faithfully C JR S & Co. 2nd Floor, Vaidya Towers Residency Road, Chinnakada CHARTERED ACCOUNTANTS Kollam - 691 001 Phone : 0474- 2744530 E-mail : [email protected] [email protected] [email protected] INDEPENDENT AUDITORS' REPORT ON INTERIM FINANCIAL STATEMENTS To M/s Kerala Rural Water Supply and Sanitation Agency, Thiruvananthapuram 1. Report on the Interim Financial Statements We have audited the interim financial statements of M/s. Kerala Rural Water Supply and Sanitation Agency, Thiruvananthapuram which comprise of the Balance Sheet as at December 31', 2019 and the Statement of Income and Expenditure from the period 01/04/2019 to 31/12/2019, and a summary of Significant accounting policies and other explanatory information. 2. Management's Responsibility for the Interim Financial Statements Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position and financial performance of the organization. This responsibility includes the design, implementation and maintenance of internal controls relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error. 3. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We have conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. Head Office: 2nd Floor, The Monarch, P. T.Usha Road, Kochi - 682011. Phone: 0484 -2373227,2371202 Fax: 0484 - 4040754. E-mail: [email protected] Branches : (l) TC 23/59 PNRA B-15, Ambalamukku, Kowdiar, Trivandrum - 695003 Phone: 0471- 2431300 E-mail: [email protected], [email protected] (2) Shivasakti Arcade, No. - l 70, First Floor,CQAL Layout, Block - B, Sahakar Nagar, Bangalore - 560092 An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's Judgment, including the assessment of the risks of material misstatement of the financial Statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the organization's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management as well as evaluating the overall presentation of the financial statements. The Receipt and Payment from 01/04/2019 to 31/12/2019 of all Grama Panchayats are consolidated and the same is incorporated in the consolidated financial statements. We have audited the accounts of a representative sample randomly selected from among the total Grama Panchayats. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion 4. Basis for Qualified opinion 1. Rs 11,40,20,823.00 expenditure booked as Common Infrastructure - KWA against Advance to KWA in the interim Financials are booked based on Audit reports on Utilization off unds released to KWA periodically. ii. Other matters which may have an impact on the financial statement are as specified in Annexure-1 to the Audit Report. 5. Qualified Opinion In our opinion and to the best of our information and according to the explanations given to us, except for the possible effect of the matters described in the basis for qualified opinion paragraph, the Interim financial statements give the information required in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India: i. In the case of the Interim Balance Sheet, of the state of affairs of the Kerala Rural Water Supply and Sanitation Agency as at 31· December, 2019,and ii. In the case of the Interim Statement of Income and Expenditure of the Incomes and Expenditures for the period from 01/04/2019 to 31/12/2019 6. Report on other legal and regulatory requirements i. We have obtained all the information and explanations which to the best of our knowledge and belief, were necessary for the purpose of our audit; ii. In our opinion, proper books of account as required by law have been kept by the Institution so far as appears from our examination of the Said books; iii. The Balance sheet and the Statement of Income and Expenditure dealt with by this report are in agreement with the books of account; Place: Kollam For JRS & Co. Date: 24/03/2020 CHARTERED ACCOUNTANTS UDIN: 20221098AAAACC5281 =ta= JAMU JAHAMGHEER FCA PARTNER M. No. 221098 FR No. 008085S Annexure-I to our Interim Audit Report dated 24h March 2020 as Specified in para vi - Basis For Qualified Opinion 1) Regional Project Management Unit, Malappuram • The following statutory dues and payable carried forward from previous year continue to remain outstanding as on the date of Balance sheet. As per the communication from the RPMU the opening value of the following accounts were due to negligence from the part of then accountant Deduction Others 62852 Dr Retention Money 3147682 Dr KCWWF 13913 Dr KCWWF Contribution 520170 Cr Salary Deductions - LIC 13970 Dr Salary Deductions- Others 676559 Dr Salary Deductions- PF 220060 Dr Salary Payable 88000 Dr TDS - Against Consultancy 1044223 Cr TDS - Against Contract 69281 Cr TDS - Against Rent 14720 Dr TDS - Against Salary 344091 Dr VAT 1625271 Cr This has resulted in understating the retention money in balance sheet by Rs 31,4 7,682 and overstating of Sundry Creditors by Rs 18,24, 780. NOTES FORMING PART OF THE INTERIM FINANCIAL STATEMENTS AS ON 31.12.2019 1. Project information The Government of Kerala established Kerala Rural Water Supply and Sanitation Agency (KRWSA) under the Societies Act and was entrusted the implementation of the World Bank loan assisted Rural Water Supply and Sanitation Project. The project integrates Water Supply with Sanitation, Health & Hygiene Promotion, Environmental Management and Ground Water Recharge activities. 2. Significant accounting policies A. Basis of accounting 1. The entity has been following Cash based accounting system. 11. Out of Grant from Government of Kerala, an amount equivalent to the cost of fixed assets has been treated as capital Grant and balance is treated as revenue Grant. The revenue Grant from Government of Kerala-Jalanidhi (Phase II) of Rs. 87,22,37,286/- is matching figure to cover the various expenses incurred except depreciation, after considering all other incomes. B. Fund flow: Kerala Rural Water Supply and Sanitation Agency (KRWSA) mainly receives funds from Government of Kerala for Jalanidhi Phase II through the State Plan Budget. This state budget is released to KRWSA, Kerala Rural Water Supply and Sanitation Agency's (PMU) Treasury Account by following the Governments system of release of funds. As per requirement, the funds are transferred from Treasury to PMU's nationalized commercial Bank Account. Based on the expenditure incurred as per project guidelines, World Bank claim is prepared and sent to GOI, CAAA for reimbursement. The GOK funds received under the budget head is first expended and based on the actual expenditure, claim statement is prepared, which will be forwarded to the World Bank through GOI, CAAA. Based on this claim, World Bank reimburses the expenditure on the agreed percentage. C. Treatment of expenses during project period: Project Monitoring Unit (PMU) and Regional Project Monitoring units (RPMU) incur revenue expenses, makes payments for consultancies entrusted by them, purchase goods etc. as per rules from their bank account. Gram Panchayats (GP) incurs expenses on works, goods, training, services and consultancies undertaken and done by GP, in the agreed terms. Beneficiary Groups (BG) incurs expenditure on the approved project activities. The cost of the project undertaken by the BG will be shared between the stake holders as per the agreement between the BG and GP. D. Tangible Assets (Property, Plant and Equipment): The Property, Plant and Equipment are accounted on historical cost basis, which includes purchase price, and all other costs attributable to bringing the assets into its working condition as reduced by accumulated depreciation up to 31.12.2019. Fixed Assets schedule includes Assets in respect of Jalanidhi Phase 1 & Phase 2. E. Disbursement arrangements: Government of Kerala will pre-finance all the project expenditure through its own funds (through the budget line). KRWSA, KWA, GP and BG will incur the project expenses as per project guidelines and report the quarterly 'actual expenditure' incurred at the PMU, RPMU and BG/GP levels through the Interim Financial Reports (IFRs). F. Depreciation: i) Depreciation has been charged on the "Written Down Value Method" on the block of assets as per the provisions of Section 32 of Income Tax Rules, 1962.

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