Public Disclosure Authorized

Ilubei Provincial Audit Office of the People's Republic of

Audit Report Public Disclosure Authorized if? 4 [2017] 55 -

HB AUDIT REPORT C2017) NO.55

Project Name: Historic Town Conservation Project Financed by the World Bank Public Disclosure Authorized

Ak #: 8574-CN Loan No.: 8574-CN

Project Entity : Project Management Office under the Project Leading Group for the World Bank Financed Project in Jingzhou

Public Disclosure Authorized 2016 Accounting Period: 2016 Contents

I. Auditor's Opinion ...... 3

...... 5

II. Financial Statements and Notes to the Financial Statements ...... 5

...... 5

i. Balance Sheet ...... 5 ...... 7

ii. Summary of Sources and Uses of Funds by Project Component...... 7

( 1p)4 ifI ; ...... 9

iii. Statement of Implementation of Loan Agreement...... 9

( ) P ...... 11

iv. Designated Account Statement...... 11 (3w) k- # RA...... 13

v. Notes to the Financial Statements ...... 16

III...uditFindingi...... 19 111. Audit Findings and Recommendations ...... 20 -. 4fittll

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2 . Auditor's Opinion

Auditor's Opinion

To Project Management Office under the Project Leading Group for the World Bank Financed Project in Jingzhou (PMO)

We have audited the special purpose financial statements (from page 5 to page 18) of Hubei Jingzhou Historic Town Conservation project financed by the World Bank, which comprise the Balance Sheet as of December 31, 2016, the Summary of Sources and Uses of Funds by Project Component, the Statement of Implementation of Loan Agreement and the Special Account Statement for the year then ended, and Notes to the Financial Statements.

Project Entity's and Hubei Provincial Finance Bureau's Responsibility for the Financial Statements The preparation of the Balance Sheet, the Summary of Sources and Uses ot Funds by Project Component and the Statement of Implementation of Loan Agreement is the responsibility of your entity, while the preparation of the Designated Account Statement is the responsibility of Hubei Provincial Finance Bureau, which includes: i. Preparing and fair presenting the accompanying financial statements in accordance with China's accounting standards, accounting system, and the requirements of the Loan Agreement of the project; ii. Designing, implementing and maintaining necessary internal control to ensure that the financial statements are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Government Auditing Standards of the People's Republic of China and International Standards on Auditing. 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. An audit involves performing proccdures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures

3 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 entities' preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is appropriate and sufficient to provide a basis for our audit opinion. Opinion In our opinion, the financial statements identified in the first paragraph present fairly, in all material respects, financial position of Hubei Jingzhou Historic Town Conservation Project financed by the World Bank as of December 31, 2016, its financial receipts and disbursements, the project implementation and the receipts and disbursements of the designated account for the year then ended in accordance with China's accounting standards and system, and the requirements of the project Loan Agreement. Other Matters We do not comment on this item because no loan withdrawal application for this project was submitted during this period. The audit report consists of the Auditor's Opinion and two more parts hereinafter: Financial Statements and Notes to the Financial Statements, Audit Findings and Recommendations.

Hubei Provincial Audit Office June 30, 2017

Address: No.3 Tian'e Road, Wuchang , , Hubei, PRC. Postcode: 430071 Tel.: 86-027-87236025 Fax: 86-027-87252502

The English translation is for the convenience of report users; Please take the Chinese audit report as the only official version.

4 I. Financial Statements and Notes to the Financial Statements

i. Balance Sheet

BALANCE SHEET

2016 I 12 ,] 31 N (As of December 31, 2016)

Project Name: Hubei Jingzhou Historic Town Conservation Project Financed by the World Bank

Prepared by: Project Management Office under the Project Leading Group for the World Bank Financed Project in Jingzhou Currency Unit: RMB Yuan

pplanNon of Fund Lme Beginning Balance Ending Balance Sources of Fund ne Beginning Balance Ending Balance

Tzt Flo:-t Expenditures 1 0.00 14 139,487.65 Total Project 28 0.00 93,850,000.00 Appropriation Funds

Fsxed Assets Transferred 2 Project Capital and Capital 29 Surplus

Costiruction Expenditures to 3 - - cli:G 30 .De D-sposed Including: Grants 3

bestments Transferred-out 4 -Total Project Loan 31 0.00 1,734,250.00 1. ttIRWA Construcuon in Progress 5 0.00 14,139,48765 Total Project Investment 32 000 1,734,750.00 Loan

Loan Receivable F Foreign Loan 33 0.00 1,734,250.00

IHdBn 7 -- 34 breestnent7 Loan Receivable Including: IDA

AW e on of Investment 8 -- 35 0.00 1,734,250.00 Las___IBRD

dmAoppopriationof 9 -- Technical 36 B Iniesoink ne Loan cooperation 10 37! ne0: Co- Financing

nqtepment Losses in I - (2) 38 Domestic Loan

12 0.00 81,839,855.72 2. Othr La -- Tc- Cash' and Bank Other Loan

13 0.00 81,836,794.72 Appropriation of 40 - Investment Loan

14 Including World Dank 41 - ______Loan

15 0.00 3,061.00 42 - Cash a HandBond Fund Tobe continued)

5 Receivable 16 0.00 5,000.00 Construction Expenditures 43 to be Offset

on; Bnk ILoan 17 -- 44 \eab,le Total Payablc

C3w Fee 18 - Including: World Bank 45 - Loan Interest Payable

Wrld Bank Loan Service- 19 - World Bank Loan 46 Commitment Fee Payable

20 - -I47 -- M eurris World Bank Loan Service Fee Payable

21 0.00 48,077.80 48 TaijF d Asets Other Payables

22 0.00 70,240.00 49 - 22u.00n0,4000Appropriation of Fund

L cumulated 23 0.00 22,162.20 Rå E ig 50 0.00 448.171.17 Retamned Eammngs

24 0.00 48.077.80

25 :Asses Pending Disposal

F : Assas Losses in 26

27 0.00 96,032,421.17 T o f51 0.00 96,032,421.17 TaAppcationFund of Total Sourcs of Fund421 ( S n1. fi. Summary of Sources and Uses of Funds by Project Coppo oent

Summary of Sources and Uses of Funds by Project Component I AM 2016 $ 12 ) 31 U (For the period ended December 31, 2016)

7oiect Name: Hubei Jingzhou Historic Town Conservation Project Financed by the World Bank flXAJiý t,f-f ýt -ý4)f k, -f : A F epared by: Project Management Office under the Project Leading Group for the World Bank Financed Project in Jingzhou Currency Unit: RMB Yuan *43I† Current Period Cumulative

Curremt3i 31 ljU'i- I 1,i M91 with98_ýi f Uumulaive Current Period Current Period Period % Life of PAD Cumulative Actual % Completed Budget Actual Compleie d

95,584,250 00 96,032,421.17 100.47% 1,048,654,100.00 96,032,421 17 9.16% T orcs' of Funds inaracing-

1,734,250.00 1,734,250,00 100.00% 615,000,000.00 1,734,250.00 0.29. - -4 Counterpart 93,850,000.00 94,298,171.17 100.48% 433,654,100.00 94,298,171.17 21.74%

ý_ -. 'n Total Appbcanon of Funds(ä2 14,139,47.65 14,139,48765 100.00% 1,048,654,100.00 14,139,487.65 1.35%

H Cuhural Heritage 348,872,300.00 Cosnnand Tourism semces Improvement

EœIogical and Water - 283,822,200.00 &v.r,nmie nt Improvemnent

-l..- 100,566,300.00 TnsotImprovemnent

Management and 31,697,500.00 insuuional Capacity inprovement Interest- 33,143,400.00

ront end fee 1,734,250.00 1,734,250.00 100.00% 1,537,500.00 1,734,250.00 112.80% K thersw 12,405,237.65 12,405,237.65 100.00% 249,014,900.00 12,405,237.65 4.98% DiTerence 81,892,933.52 81,892,933.52 Change in 5,000.00 5,000.00

2 e L C n0.00 0.00

3 % M&_ cb m 81,839,855.72 81,839,855.72 Cast andý Bank 4t Ocbe- 48,077.80 48,077.80

7 巨 「・ ｝向 ’ iv. Designated Account Statement

Designated Account Statement *,M;k _F 2016 * 12 ] 31 H (For the period ended December 31, 2016) A A L#d M t #4Y - X - P e if, J )TPqfft#: Project Name: Hubei Jingzhou Historic Town Conservation Depository Bank: CHINA CONSTRUCTION BAW Hubei Provincial Branch Project financed by the World Bank 8574-CN 42050186860800000684 Loan No. 8S74-CN Account No. : 42050186860800000684 rP f 4: 75 Prepared by: Hubei Provincial Finance Bureau Currency: USD

AMf : Part A-AccountActivity for the Current Period Amount

Beginning Balance If bo: - Add:

Total Amount Deposited this Period by World Bank

Total Interest Eamud this Period ifDeposited inSpecial Account

Total Amount Refunded this Period to Cover Ineligible Expenditures

Deduct:

Total Amount Withdrawn this Period ?A tj 4Y3A 11151 It,rn J! K9 V 3_PIT, Total Service Charges this Period if not Included in Above Amount "ohdritwn

E dffip, Balance be continued) Part B-Account Reconciliation Amount

Aimount Advacd by World Bank

Deduct: 2 ttlif~ll4&uEi Total Amount Recovered by World Bank

Outstanding Amount Advanced to the Special Account at the End of this Period

Ending Balance of Special Account

Add:

Amount Claimed but not yet Credited at the End of this Period

Application No. Amount

Amount Withdrawn but not yet Claimed at the End of this Period

7. J d (17 5 1i6 4 ) Cumulative Service Charges (If not Included in Item 5 or 6)

Deduct:

8 1'.ARA (WA At EW ) Interest Earned (If Included in Special Account)

Total Advance to the Special Account Accounted for at the End of this Period

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15 v. Notes to the Financial Statements Notes to the Financial Statements 1.Project Overview The Loan No. of Hubei Jingzhou Historic Town Conservation Project is 8574-CN. It aims to help the Jingzhou protect its cultural heritage, promote its tourism development, improve the living conditions of the people around Jingzhou Historic Town. Taking the cultural heritage conservation and utilization as the core, the Project is composed of the following four parts: Cultural Heritage Conservation and Tourism Services Improvement; Water Environment Improvement; Transport Improvement; Project Management and Institutional Capacity Improvement. The Project was started planning in November, 2013. The Project Agreement was signed on April 26, 2016 and came into effect on July 25, 2016. The account of the project is expected to be closed before June 30, 2021. The total investment of the project was planned around RMB1,048,654,100 yuan, among which the total World Bank loan amount was USD100,000,000, equivalent to RMB615,000,000 yuan. 2. Scope of the Financial Statements Consolidation scope of the financial statements covers the financial statements of the Project Management Office under the Project Leading Group for the World Bank Financed Project in Jingzhou and the Designated Account statements of the Provincial Finance Bureau. 3. Accounting Policies 3.1 The Financial Statements of the project were prepared in accordance with the requirements of Accounting Methods for the World Bank Financed Project issued by the Ministry of Finance (Caijizi[2000]No.13 ) 3.2 In accounting practice, the Gregorian calendar year is adopted as the fiscal year from January 1 to December 31. 3.3 The accrual basis and the debit/credit double entry bookkeeping method are adopted. RMB is used as the recording currency of bookkeeping. 3.4 The exchange rate adopted in the financial statements was the exchange rate on December 31, 2016 of the People's Bank of China, which is USD1= RMB6.9370 yuan.

16 4. Explanation of Subjects 4.1 Total Project expenditures By the end of 2016, the cumulative expenditures were RMB14,139,487.65 yuan, which accounted for 1.35% of the total investment plan. 4.2 Cash and Bank On December 31, 2016, the balance was RMB81,839,855.72 yuan, with deposit RMB81,836,794.72 yuan and cash RMB3,061 yuan. 4.3 Prepaid and Receivable On December 31, 2016, the balance was RMB5,000 yuan in the form of PMO staff's personal borrowing. 4.4 Fixed Assets On December 31, 2016, the balance was RMB48,077.80 yuan, which are mainly some computers, air conditioners and office furniture, etc. purchased by PMO. 4.5 Project Appropriation Funds The balance on December 31, 2016 was RMB93,850,000 yuan, which was the counterpart funds allocated by Jingzhou Municipal Finance Bureau. The total planned counterpart funds for this project were RMB433,654,100 yuan. By the end of 2016, RMB93,850,000 yuan of the counterpart funds had been allocated, which accounted for 21.64% of the plan. The total planned counterpart funds of the municipal level were RMB433,654,100 yuan and the actual cumulative allocated funds were RMB93,850,000 yuan, accounting for 21.64% of the plan. 4.6 Project LoanThe balance on December 31, 2016 was RMB1,734,250 yuan, which is the Front-End fee of US$250,000 paid to the World Bank in 2016. 4.7 Payable The balance on December 31, 2016 was RMB0 yuan. All the payable has been paid off. 4.8 Retained Earnings The balance on December 31, 2016 was RMB448,171.17 yuan, which is the bid security 400,000 yuan that Iliger Bus Company Limited (HIGER) forfeited due to its abandon of its bidding on the hybrid buses in 17 accordance with relevant regulations and bank deposit interest income 48,171.17 yuan. 5. Special Account The Special Account of this project is set in Hubei Provincial Branch of CCB, with the account number of 42050186860800000684, and USD as currency Unit. In 2016, the Special Account has not been used.

18