NATIONAL AUDIT OFFICE 2019 S TC(&AM1PFA 04 18/12June Public Disclosure Authorized T he Secretary Ministry of l iighwa\ s. Road Development and PetroleumI R esources Development. Report of the Auditor General on the Financial Statements of the Transport Connectivity and Asset Management Projeet for the year ended 31 Decemher 2018. 01. Vinaincial Statements 1.1 Opinion Public Disclosure Authorized The audit of the financial statements of the T ransport Connectivity and Asset Management financial Project for the year ended 31 Decernber 2018 comprising the statement of and cash position as at 31 December 2018 and the statement of financial performance flow statement for the year then ended, and notes to the financial statemnnts. icluding a cilis pursuance of provisions in Articie i 54(1) io the Constiui of the Demcratic Republic of Sri Lanka read in conjunetion witli provisions in the Credit Agreement Public Disclosure Authorized No. 5788 SRI - .K dated 29 September 2017 entered into between the Democratic Socialist Republic of Sri Lanka and the International Development Association ( IDA). In my opinion, the accompanying financial statements give a true and fair view of the financial position of the Project as at 3 1 December 2018, and of its financial performance and the cash flow-s for the year then ended in accordance with Sri Lanka Public Sector Accounting Standaids. 1.2 Basis for Opinion I conducted my audit in accordance with Sri ILanka Auditing Standards (SLAuSs). My Public Disclosure Authorized the Auditor's responsibilities, under those standards are further described in Responsibilities flor the Audit of the Fiinancial Statements section of m' report. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion. 1 1 3 tlher information on performance of the ProjeCt Tle olher infiormiion an stated beltw does not includ in te financial statements und mny opikion ihereo docs not cov er the otlici information. Tle ObJcti\ceo tbe Pject is to strengthen the capacity of the Road Declopmenit nuthoit on asset management and implementation f a Design- !3uild-Nlaintenance system using an Oput and Pcrlfomiiiiance 1ased Road been Contrac M uranae krinciples. 1icrefoire pilo programs bad Road fronm Ja-1a iiplemenled to maintain the sections of PPiagoda - Puttalam held on to ChiMla. However, tbe Ninisters of Cabinel had decided at its neting 15 August 2018 to restructnrc of the scope of works of the ProJect, after incurring of works a sum of Rs,91.23 mill on 6orland acquisitions, survcying, esiing and other operatäng costs by te Projcct up to 31 Decembc 2018. lFrtier, tbe and detailed ork plan under te nvw scopc ol works had not been prepared even as at concurrnce of tbe Lending Agency bad not been obtained Projct to 31 December 201 i Furher. no records had been iaintaiiind bi the enable to mcasure tbe physical progress of the m wIks as at 31 Decembei 2018. 125 nillion According to the information received, out f tbc allocations of USS (SDR 90.5 million) equivalent to Rs.18,125 million madc in te Dcelopmcnt Rs.14.500 Credit Agrceint, an allocation of USS 100 million equiv alent to million bad been translertred subscquently to tb Mienistry of Provincial Council. roads. ocal Govnemment and Sports lor improEmc1t purposes of tbc provincial equivalent FurthrC, out of tbc remuaining balance, only a sum of USS 15 milloin and to Rs.2,175 million bad been allocated to continuc the activitics of Project the balance of USS 8K5 milbon equivalent to Rs.1,232.50 million bad been the ac\ties of transferred to te Road Mainitenanec Trust Fund. Eventhough million te Project had been commenced on 30 June 2016 only a sum of Rs.96.97 bad been utillied as at 31 December 2018. 2 du k": ki e ei had ilTheProjc PliO/e only sum o of RN25). 4 million eniding Agency on I January 2018 T lance amous mintained Ile Ce itiral had rmained un-pent in the Special Dollar Accou Banka o Sri I.anka on behaiolflhe Project. for thle 1.4 Respolsibilities of anagemet ad hIlose Charged wt ilG] oernace Financial Statements of i-Inancial staemIents that give a true and Management is responsible for ile prelpalion ig Sandards and fo such t-air \iw in accrdance itl Sri Lanka >uli Sector \ccounti necessary to eiable the preparation of internal control as maieent deterimine is whether due to fraud or financial sttements thait are free froi mlaterial mi sstatcment, errør. oversceinllg le Proect's financial Those charged with governance are responsible Ior reporingl! pocess. LS Auditor Responsiiliies for ilhe Audit ut F inaleia whether ile iInancial statements as a NMy objectie is to obtain reasonabil assurance about to fraud or error, and to issue an wvIhole are free from inalerial misstatemicnt.N, wheller due assurance is a hig,h lev el of auditor's report that includes my opinion. Reasonable in accordance w,ith Sri lanka assurance, but is not a guarantee that an audit conducted misstatemieiit when it exists. Auditing Standards will always detect a material or Nlisstatements can arise from fraud ør error and are considered material ilf,individually ih economic decisions ol in the aggregate. tliy culd reasonably be expected to infiluince users taken on the basis of these financial stalements. Lanka Auditinu Standards, I exerie As part of an audit in acordance w\ ithl Sri skepticismi througlout ile audit. I also: professional jundgimeni and mainitain professional financial statements, (a) identify and a iss the risk of malcrial misstatement of tie procedures iesponsi\e to i hether due to fraud ur error, design and perform audit appropriate to provide a tliose risks, and obtain audit evidence tihat is sufficient and NATIONAL AUDIT: OFFICEý 1 basis lor my opinion. he risk of not detecting a nateril missttement resuhing fron fraud is higher than for one resultinc from error, as fraud may involve collusion, forger intentional onssrions, nisrepresentations. or the override of internal control (b) Obtain an understanding of internal control releant to the audit in order to desian audit procedures that are appropriate in the circurstances. but not for the purpose of expressing an opinion on the effectiveness of the Projeci's internal control. (c) Evaluate the appropriateness of accourning policies used and the reasonableness of accounting estimates and related disclosures made by the imaagemiet. (d) Evaluate the overall presentation, strueture and conent of the financial statements. including the disClosures. and ohether the mnancial statements represent the underlying transaetions and evenis in a manner that achieves fair presentation. I communicate with those charged with governance regarding, among other natters, significant audit tindins, includig any significant deficiencies in internal control that 1 identify during my audit. 2 Report on Other Requirenents of the Donor Agency As required by the International Developnent Association, I state the followings: (a) Ihe basis of opilion and scope and limitations of the audit are as stated above. (b) 111 iy opinion: - The funds proXided has been utilized for the purposes for which they Xwere provided. - The opening and closing balances, withdrawals from and replenishlents to the Special Dollar Account had been truly and fairlv disclosed in the books and records maintained by the Projeet and the balance as al 31 Decenber 2018 bad been satisfactorily reconciled wvith the accounting records of the Central Bank of Sri 1 anka as at that date. 4 TheC mme t of xEpend iIre suritd old be~ fail relied upon to suppior theapleation for reimbursement in accordance w.h he req uiremnt sped'- icifie t in the rcdit A reemn. The satisfaclory measures Ihad been takenhyt icto ea ity te Io<ies hmihlight im my) prevl1d Crdis year1n audit report, hed TIhe Inanicial covenant s laid dow..n in the Credit Agreemecnt had been compliecd w. ih. W.P Wicramaathn *Il MINISTRY OF HIGHWAYS & ROAD DEVELOPMENT AND PETROLEUM RESOURCES DEVELOPMENT WORLD BANK FUNDED TRANSPORT CONNECTIViTY AND ASSET MANAGEMENT PROJECT IDA CREDIT NO: 5788 LK FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 ST DECEMBER 2018 Transport Connectivity and Asset Mxinagoment Project No:1 22,Nlain Street, Ba ttararnulla. MINISTRY OF HIGHWAYS & ROAD DEVELOPMENT AND PETROLEUM RESOURCES DEVELOPMENT ROAD DEVELOPMENT AUTHORITY TRANSPORT CONNECTIVITY AND ASSET MANAGEMENT PROJECT IDA CREDIT NO: 5788 LK FINANCIAL STATEMENTS FOR THE YEAR ENDED 31.12.2018 CONTENTS Pages 1. Introduction 01-04 2. Statement of Financial Position as at 31 )December 2018 05 3. Statement of Changes in Funds 2018 06 4. Statement of Cash Flow for the year ended 31 s December t20 18 07 5. Accounting Policies and Notes to the Financial Statements 08 - 16 6. Trial Balance as at 3 1" December 20 t 8 17- 19 MINISTRY OF HIGHWAYS & ROAD DEVELOPMENT AND PETROLEUM RESOURCES DEVELOPMENT ROAD DEVELOPMENT AUTHORITY TRANSPORT CONNECTIVITY AND ASSET MANAGEMENT PROJECT IDA CREDIT NO: 5788 LK FINANCIAL STATEMENTS 2018 Introduction Rleporting Entrn These Financial Statements relate to the Transport Connectivity and Asset Management Project executed by the Ministry of Ministry of Highways & Road Development & Petroleum Recourses Development and Implemented by the Road Development Authority (RDA). The Project Office is located at No. 122, Main Street, Battaramulla. The Overview ofthe OJriginalI Project Ihe preparatory work of the Transport Connectivity & Asset Management Project (TCAMP) is commenced in 2014 under IDA Loan 4906 of the RSAP II and the project has two (02) components. (1) Institutional strengthening and capacity building for road asset management - This component will finance activities to support the RDA in institutionalizing and expanding the use of the Design, Build and Maintain (DBM) methodology using the Output and Performance Based Road Contract (OPBRC) format and implement institutional and system changes necessary in the RDA and in the construction industry.