Xinjiang Uygur Autonomous Region Audit Office of the People's

Republic of China

Audit Rep ort

I$?44 (2016) 40 1

XINJIANG AUDIT REPORT (2016] NO.40

Project Name: Urumqi District Heating Project by the World Bank

' : 8046-CNLoan No.: 8046-CN

Project Entity: Urumqi Heating Reform and Building Energy Efficiency

International Technical Cooperation Project Office

4iA: 2015

Accounting Year: 2015

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Contents.. ...................... . 1

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

............... ..................... 6

II .Fin ancial Statements and Notes to the Financial Statements............6

. . .......................................................... 6

i. Balance Sheet.... ........ 6

*.. ..................................... 8

ii. Summary of Sources and Uses of Funds by Project Component..... 8

A ,zfkff1A............................ 10

iii. Statement of Implementation of Loan Agreement...... ..... 10

.*..................................... 11

iv.Desi gnated Account Statement................ ........ 11

(H) M................................ 13

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

w............................ ... 19III. Audit Findings and Recommendations.................... 20

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I Auditor's Opinion

Auditor's Opinion

Urumqi Heating Reform and Building Energy Efficiency InternationalTechnical Cooperation Project Office

We have audited the special purpose financial statements (from page 6 topage 18) of Urumqi District Heating project financed by the World Bank,which comprise the Balance Sheet as of December 31, 2015, theSummary of Sources and Uses of Funds by Project Component, theStatement of Implementation of Loan Agreement and the DesignatedAccount Statement for the period then ended, and Notes to the FinancialStatements.

Project Entity and Autonomous Region Provincial FinanceDepartment's Responsibility for the Financial Statements

The preparation of the Balance Sheet, the Summary of Sources and Usesof Funds by Project Component and the Statement of Implementation ofLoan Agreement is the responsibility of your entity, while thepreparation of the Designated Account Statement is the responsibility ofAutonomous Region Finance Department, which includes:i. Preparing and fair presenting the accompanying financial statements inaccordance with Chinese accounting standards and system, and therequirements of the project loan agreement;ii. Designing, implementing and maintaining necessary internal controlto ensure that the financial statements are free from materialmisstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these financial statementsbased on our audit. We conducted our audit in accordance with theGoven-tment Auditing Standards of the People's Republic of China andInternational Standards on Auditing. Those standards require that wecomply with ethical requirements and plan and perfonn the audit toobtain reasonable assurance about whether the financial statements arefree from material misstatement.An audit involves performing procedures to obtain audit evidence aboutthe amounts and disclosures in the financial statements. The proceduresselected depend on the auditor's judgment, including the assessment ofthe risks of material misstatement of the financial statements, whetherdue to fraud or error. In making those risk assessments, the auditor

3

considers internal control relevant to the entities' preparation and fairpresentation of the financial statements in order to design auditprocedures that are appropriate in the circumstances, but not for thepurpose of expressing an opinion on the effectiveness of the entity'sinternal control. An audit also includes evaluating the appropriateness ofaccounting policies used and the reasonableness of accounting estimatesmade by management, as well as evaluating the overall presentation ofthe financial statements.We believe that the audit evidence we have obtained is appropriate andsufficient to provide a basis for our audit opinion.

Auditor's Opinion

In our opinion, the financial statements identified in the first paragraphpresent fairly, in all material respects, financial position of UrumqiDistrict Heating Project financed by the World Bank as of December 31,2015, its financial receipts and disbursements, the projectimplementation and the receipts and disbursements of Designatedaccount for the year then ended in accordance with Chinese accountingstandards and system, and the requirements of the project loanagreement.

Other Matter

We also examined the withdrawal application from 012, 013, 014, 015,016, 017, 018 and the attached documents submitted to the World Bankduring the period. In our opinion, the withdrawal application and theattached documents complies with the project loan agreement and canserve as basis for loan withdrawal.

The audit report consists of the Auditor's Opinion and two more partshereinafter: Financial Statements and Notes to the Financial Statements,Audit Findings and Recommendations.

Xinjiang Uygur Autonomous Region Audit Office of the People'sRepublic of ChinaJune23 , 2016

4

Address: NO.186 Jianshe Road, Urumqi City,Xinjiang,UygurAutonomous Region, P.R. ChinaPostcode: 830002Tel.: 86-0991-2815503Fax: 86-0991-2815503

5

II.Financial Statements and Notes to the Financial Statements( ) WFfl

i. Balance Sheet

BALANCE SHEET2015 * 12 A 31 H

(As of December 31, 2015)

Project Name: Urumqi District Heating Project by the World BankA tT tt *tk:A IF AeAX LA N ~ftYKf V f II~ )b-

Prepared by: Urumqi Heating Reform and Building Energy Efficiency InternationalTechnical Cooperaton Project Office Currency Unit: RMB Yuan

1& d! I r Line ft * MMBeginning

Application of Fund No Ending Balance Sources of Fund Line No. Beginning Balance Ending BalanceBalance

r I-tit TalProict

.Ilifli+ TotalProjectExpenditures 1 1,660,339,33266 1,915,889601 13 28 473,100,000.00 709,621,50000Appropriation Fonds

2 29Fi.ed Assets Transfenred Project Capital and Capital Surplu

2 f4t*Rf tBa301:MMA3 30

Coustnuction Expenditues to be Disposed Including: Grants

3 tHlBk InvestenItsTansfitsd-out 4 A F R*tit Toal Project Loa 31 1,216,152,463.42 1,308,931,733.18

L Alliva Total Project4 an12 Construction Progress 5 1,660,339,332 66 1,915,S9,601 13 32 1,216,152,46342 1,308,931,733.13

Invesanent Loan

, Edif4 RRfliR(1) 15191fli6 33 391,152,463.42 563,931,733 18

Invstimet Loan Receivable Foreign Loan

ass&Ialk l-flC Including: x4 5fIaiff t17 34 -

World Bank Investmnt Loan Receivablo Including IDA

35 391,152,463.42 563,931,7333.18Appropriation of Investment Loan IBRD

Inluding Appropriation of World Bank 9 36Technical Cooperation

Investmemo Loan

V| Bit Equipment 10 63,989,964.07 83,345,771.52 QM I Co- Financing 37

~A#WN'Io*M 02) 19P4 .11 35 825,000,000.00 745,000,000.00

Including& Equipment Losses in Suspense Domestic Loan

0 *. *iBIa it Total Cash and Bank 12 230,566,459.85 166,141,759.46 2- Allif5k OMher L.n 39

n.uIn# 1a1 J-rnRAiRWn13 230,566,459,85 166,141759.46 40

Cash in Bank 6ppoapriean oflInvesnmni Ion

14 27,240013.73 7,479.2367 41Including Special Account including World Bank Lan

2 mIt& CashonHand is It*1! % it Bond Fund 42

8 (To be continued)

6

16 113,340,262.47 127.002,149.22 Construction Expendirs to bo 43Total Potpaid and R.eivabl.

Offsct

Inlddng: World Bank Loao lnterrt 17 44 374,305,293.59 269,434,63742Tol Pavable

Receivable

World Bank Loan Commitment Fer 18 - Inoluding: World Bank Loan Inermsc 45

ReceiablePayable

World Bank Lan Sorvim- Foe 19 - World Bank Loan Conmitment 46

Receivable For Payacl

20 World Bank Loan Servico For 47Maktablo Seuriti.s

Payabl

, EAtit e5gR*lit

2 48 39,81553 44,$11.36Total Fixed Assets Other Payable

22 49Fi..d Asers, Cost Approprtiaon of Fond

23 50 4,638,446.51 5,546,89937Les Accumulated precian Retainod Eanings

24Fixed Asseis, Not

ii&ýt NAt ftit27 2,068,236,01905 2,292,579,28133 51 2,068,236,019.05 2,292,579,20133

Total Application of Fond Total Somcesa of Fond

7

ii.Summ ary of Sources and Uses of Funds by Project Component

SUMMARY OF SOURCES AND USES OF FUNDSBY PROJECT COMPONENT I

A A 2015 - 12 R 31 H(For the period ended December 31, 2015)

Project Name: Urumqi District Heating Project by the World Bank

Prepared by: Urumqi Heating Reform and Building Energy Efficiency International Technical Cooperation Project OfficeCurrency Unit: RMB Yuan

Current Period Cumulative

Current Current Period Current A H f i if Aam CivPeriod cu i Period % Life of PAD Cumulative Actual Cmlte%u t Actual Completed Completed

Total Sources of Funds 231,727,00000 329,300,769.76 142.11% 2,299,760,000.00 2,018,553,233 18 87.77%

I a231,727,000.00 172,779,26976 74.56% 670,000,00000 563,931,733.18 84.17%itetio nlfianSLng, g1. t t!MSMf

23),727,000.00 172,779,269.76 7456% 670,000,000.00 563,931,733.18 84.17%WB

Counterpart Financing 156,521,500.00 1,629,760,000.00 1,454,621,500.00 89.25%

. ~ AppropriationFunds 236,521,500.00 422,892,000.00 709,621,500.00 167.90%

(1) AMELE Prefectural level counterpart

fund 1,521,500 00 294,116,000.00 474,621,500.00 161,37%

(2) 440- Others 235,000,000,00 128,776,000.00 235,000,000.00 182.49%

2. ftzkE Other Loan -80,000,000,00 1,206,86s,000.00 745,000,000.00 61.73%

Total Application of Funds (by Project 265,698,000,00

Component) 255.550,26847 96.18% 2,299,760,00000 1,915,889,601.13 83.31%

51,326,000.001.6 EXAMI Shaqu Shayibake (SHN) 42,926,70664 83.64% 921,380,000.00 635,830,016.03 69,01%

2 .11t=MAV1n Ururmci Weidian 111 (UHN) 107,632,000 00 85,429,427 39 79,37% 1,183,020,000.00 794,405,264 22 67.15%

3.,t4iE* Front-end Fee 1,623,400,00

4. VLAik*fl Istitutional 9,320,000.00

Strengthening and Training 3,668,31181 39.36%6 9,581,524 80 3,668,311.81 38.29%

101,120,552.27 457,957,33871

6 97,420,000.00 22,405,270 36 23% 185,778,475,20 22,405,270.36 12.06%

A Difference 73,750.501 29 102,663,632.05

I. 13,661,886,75 127,002,249.22

2. vt1Rft -10S,870,656 17 268,434,63742

3. imiff"t -64,424,700.39 166,141,75946

4 994 19,535,807 45 83,545,771 52

5 WE -913,148.69 -5591,41073

8

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-,-1�님 「

V ttpiv. Designated Account Statement

-rK z * P #DESIGNATED ACCOUNT STATEMENT

12015 * 12 ] 31 H

(For the period ended December 31, 2015)

A

Project Name: Urumqi District Heating Project by the World Bank

8046-CN

Loan No. 8046-CN

Prepared by: The Finance Department ofXinjiang UygurAutonornous Region

)TP * ff t #: P W ik ff * ONP-C 3 - tf A MDepository Bank: China Bank Xinjiang Branch SUB

108223318310

Account No.: 108223318310

Currency: USD

A 93 : *9

Part A-Account Activity for the Current Period Amount

4,451,710.04

Beginning Balance

Add:

22,920,000.00Total Amount Deposited this Period by ADB

337.78Total Interest Earned this Period ifDeposited in Special Account

M T 4 A Lb H A 10- 9

Total Amount Refunded this Period to Cover Ineligible Expenditures

Deduct:

* M A ill A 0 26,220,26242Total Amount Withdravm this Period

*M+P MrtJ4,tVt nJJK*_%7 -ffl

Total Service Charges this Period if not Included in Above Amount

Withdraym

M*15M 1,151,785.40Ending Balance

(. ITo be continued

Parn B-Account Reconciliation Amount

10,000,000-00Amount Advanced by ADB

Deduct:

2. 11 $1IF&Total Amount Recovered by ADB

3. *#PRROutstanding Amount Advanced to the Special Account at the End of this 10,000,000oPeriod

4. ## 1PM V1,151,785.40

Ending Balance of Special Account

Add:

5. 99AMM* i4R41A E AM8,850,527,03

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

Application No. Amount

6, i 4,532.22Amount Withdrawn but not yet Claimed at the End of this Period

7 f Rljifili (05fff 5816 9) 1000Cumulative Service Charges (If not Included in Item 5 or 6)

Deduct:

8. AA&A (4AWRPWV ) 6,85465Interest Earned (If Included in Special Account)

9. PTotal Advance to the Special Account Accounted for at the End of this 10,000,00000Period

12

닙「� ;:--

-: --!

⋯1,9⋯⋯ ⋯⋯11⋯⋯⋯⋯⋯币⋯； 其中指定账户存款折合人民币7,479,233.67元。

’⋯配欲 丫⋯项目计划配套资金总额人民币1,629,760,000.00元，截至2。巧年

⋯一 ’

1 2015年12月31日余额人民币5,546,89937元注要是银行存款&{｝ 矛习。息叼交入。

{5 ．指定账户使用情况’ 本项目指定账户设在中国银行新疆分行营业部，账号为:108223318310 ，币种为粎元。本年指定账户净额为 10,000,000.00美

元，2015年年初余额 4,451,710.04美元，本年度回补 22,920,000.00粎元，利息收入 337.78粎元，本年度支付26,220,2 62.42美元，年末余额 l,151,785.40美元。

⋯⋯

{

v Notes to the Financial Statements

Notes to the Financial Statements

1.Project profileThe Loan Agreement of UDHP (Urumqi District Heating Project)wassigned in June 8, 2011, and became effective in the same year, theconstruction of UDHP will be completed in December 31, 2015, Closureof loan account will in December 31, 2015. The proposed projectdevelopment objective (PDO) is to connect consumers in selecteddistricts of Urumqi City to district heating services with improved energyefficiency and environmental performance. Total estimated cost of UDEPis RMEB 2.3 billion Yuan, including the Word Bank Loan of US$ 100million (RMB 670 million Yuan), about 30% of total cost. Counterpartfunds are RM[B 1.63 billion Yuan, about 70% of total cost. There are threecomponents in the LJDHP: I Component A. Shuimogou District UrumqiCHP Plant District Heating Network (UHN) 2 Component B: ShayibakeDistrict CHP Heating Network (SHN) 3 Component C: InstitutionalDevelopment and Project Management

2 Consolidation Scope of the Financial StatementsConsolidation scope of the financial statements covers the financialstatements of the Urumqi Heating Power Parent Company (HeatingPower Parent Company), as well as the Designated Account set in theAutonomous Region Finance Department.

3. Accounting Policies3.1 The Financial Statements of the project were prepared according tothe requirements of Accounting Methods for the World Bank FinancedProject Xa izi[2000]Nb. 13 ) .

3.2 In accounting practice, the Gregorian calendar year is adopted as thefiscal year from January I to December 3 1.

3.3 The accrual basis and the debit/credit double entry bookkeepingmethod are adopted. RMB is used as the recording currency ofbookkeeping.

3.4 The exchange rate adopted in the financial statements was theexchange rate on December 31, 2015 of the People's Bank of China,which is USD I RMB 6.493 6 yuan.

4.Notes for the main accounts

16

4.1 Total Project expendituresThe project expenditure in 2015was RMB 255,550,268.47 yuan, and thecumulative expenditures were RMB 1,915,889,601.13 yuan, whichaccounted for 83.31% of the total investment plan.

4.2 EquipmentBy the end of December 31, 2015,th e balance was RMB8 3 ,545,771.52yuan.

4.3 Cash and BankBy the end of December 31, 2015 the balance was RMB16 6,141,759.46yuan. And the funds in the Designated Account wereconverted to RMB 7 ,4 7 9,233.67yuan.

4.4 Prepaid and ReceivableBy the end of December 31, 2015, the balance was RMB12 7 ,00 2 ,149.22yuan, mainly the prepaid, and the internal transfersbetween the business account of the Heating Power Parent Company.

4.5 Counterpart FundsThe balance on December 31, 2015 was RMB 1,4 5 4 .62 1,500.00yuan,which was the free counterpart funds and the domestic bank loans.The total planned counterpart fund of this project was RMB1, 629,760,000.00 yuan. By the end of 2015, RMB 1,454,621,500.00yuan of the counterpart funds had been allocated, which accounted for89.25% of the plan, including the local level counterpart fund ofRMB709,621,500.00yuan and the domestic bank loan ofRMB745,000,000.00 yuan.

4.6 Foriong LoanThe balance on December 31, 2015 was RMB 563,931,733.18 yuan.

4.7 PayableThe balance on December 31, 2015 was RMB 268,434,637.42 yuan,mainly payable to the equipments, engineering and quality assurancedeposit of the construction entities.

4.8 Other PayablesIts balance on December 31, 2015 was RMB 44,511.36 yuan, mainlyinterest earned of Designated Account.

4.9 Retained EarningsThe balance on December 31, 2015 was RMB 5,546,899.37 yuan, mainly

17

interest earned of bank deposit.

5. Designated AccountThe Designated Account of this project is set in Depository Bank: China

Bank Xinjiang Branch SUB, with the account number of 108223318310,

and USD account. The initial Deposit of the Special Account is USD

10,000,000. The beginning balance of 2015 was USD 4,451,710.04and

the reimbursement in the year was USD 22,920,000.00. This year the

interest earned was USD337.78and the disbursement was USD

26,220,262.42. This year the total service charges this period if not

Included in above amount withdrawn was USD Thus, the ending balance

was USD1,151,785.40.

18