REPUBLIC OF KENYA W4 OFFICE OF THE AUDITOR-GENERAL REPORT F THE AUDITOR-GENERL ON THE FINANCIAL STATEMENTS OF EASTERN AFRICA REGIONAL TRANSPORT, TRADE AND DEVELOPMENT FACILITATION PROJECT CREDIT NO 5638-KE FOR THE YEAR ENDED 30 JUNE 2018 INFORMATION AND COMMUNICATIONS TECHNOLOGY AUTHORITY ICT uthority REGISTRy 2 8 NOV 2018 RECEIVED Project Name: EASTERN AFRICA REGIONAL TRANSPORT, TRADE and DEVELOPMENT FACILITATION PROJECT Implementing Entity: The Information and Communication Technology (ICT) Authority PROJECT GRANT/CREDIT NUMBER... IDA Credit No.: 5638-KE ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED JUNE 30, 2018 Prepared in accordance with the Cash Basis of Accounting Method under the International Public Sector Accounting Standards (IPSAS) Eastern Africa Regional Transport, Trade and Development Facilitation (EARTTDP) Project Reports and Financial Statements For the financial year ended June 30, 2018 CONTENTS PAGE 1. PROJECT INFORMATION AND OVERALL PERFORMANCEROR**N................*************.......l. 2. STATEMENT OF PROJECT MANAGEMENT RESPONSIBILITIESSPO 3. REPORT OF THE INDEPENDENT AUDITORS ON THE EARTTDP PROJECT..............................vi 4. STATEMENT OF RECEIPTS AND PAYMENTS FOR THE PERIOD ENDED 30TH JUNE 2018 .............. 1 5. STATEMENT OF FINANCIAL ASSETS AND LIABILITIES AS AT 30TH JUNE 2018......................... 2 6. STATEMENT OF CASHFLOWS..........................................***.*.*****..*.. ****.*............*.**..................................3 7. STATEMENT OF COMPARATIVE BUDGET AND ACTUAL AMOUNTS......................................4 8. NOTES TO THE FINANCIAL STATEMENTS 5 9. PROGRESS ON FOLLOW UP OF AUDITOR RECOMMENDATIONS........................................ 9 1 Eastern Africa Regional Transport, Trade and Development Facilitation (E4RTTDP) Project Reports and Financial Statements For the financial year ended June 30, 2018 1. PROJECT INFORMATION AND OVERALL PERFORMANCE 1.1 Name and registered office Name: The project's official is: Ag. CEO John Sergon Objective: East Africa Regional Transport, Trade and Development Facilitation Project, the Government of Kenya aims at achieving the following development objectives: (i) contribute to extend the geographic reach of broadband networks including enhanced international connectivity for both South Sudan and Kenya, and (ii) Contribute to improved delivery of public services. Project Activities- ICT Component To enhance internet connectivity through construction of approximately 600 kilometres of high capacity fiber optic cable and associated connections alongside the Eldoret to Nadapal- Nakodok road with provision for fiber spurs and rings to connect schools, hospitals, other strategic locations including pastoralist road side markets, export processing zones, rest stops, community centers and service centers along the Nadapal- Nakodok road. Overall Project The South Sudan - Eastern Africa Regional Transport, Trade and Development Facilitation Program (EARTTDFP) is a regional initiative agreed and j6intly financed by the Gbvernment of Kenya and the International Development Association for the component to be implemented by the Kenya Government agencies. The proposed program will support Kenya's economic development strategy, and address the mounting pressures to enhance connectivity of the northern parts of the country and South Sudan to the rest of the Country and more so to the Port of Mombasa. This will help to: 1. Support the fisheries development in Lake Turkana, as well as irrigation and animal resources in the north-western of Kenya by providing access to markets in the larger cities in Kenya; 2. Contribute to economic growth in the region through increased trade and better access for landlocked countries to the port of Mombasa; 3. Fully integrate the underdeveloped North-Western parts of Kenya into the larger Kenyan economy and serve the restoration and development of the South Sudan economy by promoting and facilitating regional economic integration between South Sudan and East African neighbouring countries; 4. Provide alternative direct road access to the port of Mombasa for south Sudan's export/imports (without transiting another country), as well as facilitating reconstruction efforts in all sectors in South Sudan; 5. Enhance service delivery and at the same time attract development and road side businesses in the less developed areas of the road corridor within the two economies. i Eastern Africa Regional Transport, Trade and Development Facilitation (EARTTDP) Project Reports and Financial Statements For the financial year ended June 30, 2018 Address: The project headquarters offices are Nairobi city, Nairobi County, Kenya. The address of its registered office is: Telposta Towers, 12th Floor Kenyatta Avenue P. o Box 27150-00100 Tel: +254-20-2089061 Nairobi, Kenya Email: communications@ict.go.ke Website: www.icta.go.ke The project also has no offices/branches. Contacts: The following are the project contacts Telephone: (254) 20 2089061 E-mail: communications@ict.go.ke Website: www.icta.go.ke 1.2 Project Information Project Start Date: The project start date is 16 11 20.15 Project End Date: The project end date is 21 12 2021 Project Mana er: The project manager is Mr Kwame Shiroya Project Sponsor: The project sponsor is World Bank 1.3 Project Overview Line Ministry/State The project is under the supervision of the Information and Communication Department of the Ministry. roject Project number 5638-KE Strategic goals of the The strategic goaLs of the project are as follows: project 1- Contribute to extend the geographic reach of broadband networks including enhanced international connectivity for both South Sudan and Kenya, and 2- Contribute to improved delivery of ublic services. i Eastern Africa Regional Transport, Trade and Development Facilitation (EARTTDP) Project Reports and Financial Statements For the financial year ended June 30, 2018 Achievement of The project management aims to achieve the goals through the following stratei ol means: 1- Construction of approximately 600Km of high capacity fiber optic cable and associated ductwork to be laid alongside the road from Eldoret to Nadapal-Nakodok; 2- Fiber spurs and rings to connect schools, hospitals, other strategic locations including pastoralist road side markets, export processing zones, rest stops, community centers and service centers along the corridor in the project area as part of integrated infrastructure development and smart roads network. Other important The project: background information * This project is being executed under the South Sudan - East Africa Regional o the project Transport, Trade and Development Facilitation (SS-EARTTDF) Program which is aimed at enhancing regional connectivity of South Sudan with its Eastern Africa neighbouring countries and improving access to the Mombasa sea port. Current situation that The project was formed to intervene in the following areas: the project was formed *The proposed program will support Kenya's economic development to intervene strategy, and address the mounting pressures to enhance connectivity of the northern parts of the country and South Sudan to the rest of the Country and more so to the Port of Mombasa. Project duration The project started on November 16, 2015 and is expected to run until December 21, 2021. 1.4 Bankers The following are the bankers for the current year: Citibank NA Citibank House Upper Hill Road' P.0 Box 30711-00100 TEL: +254-20-2711221 NAIROBI, KENYA 1.5 Auditors The project is audited by the Office of the Auditor General. 1.6 Roles and Responsibilities List the different people who will be working on the project. This list would include the project manager and all the key stakeholders who will be involved with the project. Also, record their role, their positions, and their contact information. iii Eastern Africa Regional Transport, Trade and Development Facilitation (EARTTDP) Project Reports and Financial Statements For the financial year ended June.30, 2018 Names Title designation Key qualification Responsibilities Kwame Shiroya Programme Manager Project Manager Overall project knowledge management Anthony Mugambi Project Manager- Project Manager Government e- technical knowledge applications Zablon Ringera Senior procurement Procurement Project technical Management knowledge advisor for specialist procurement matters Oliver Pyoko Finance Manager Accounting and Finance Manager Finance 1.7 Funding summary The Project is for duration of 6 years from November 16, 2015 to December 21, 2021 with an approved budget of US$ 500M for the overall project. The ICT Component is USD $ 29.5M equivalent to Kenya Shillings 2,979,795,000.00 (exchange rate of USD $ 1- Kenya Shillings 101.01) as highlighted in the table below: Below is the funding summary: Namre of rdono 29,50,00 2,979,795,00 758,300 76,595,88 2871,0 2,903,199,117todat ii Loan Name of ( 0 2 development partner- International Development Association Insert name of development partner (iii) Counterpart funds Government of Ken a iv Eastern Africa Regional Transport, Trade and Development Facilitation (EARTTDP) Project Reports and Financial Statements For the financial year ended June 30, 2018 1.8 Summary of Overall Project Performance: - Budget performance against actual amounts for current year and for cumulative to- date, - Physical progress based on outputs, outcomes and impacts since project commencement, - Comment on value-for-money achievements, - List the implementation challenges and recommended way forward. 1.9 Summary of Project Compliance: - Include significant cases of non-compliance with applicable laws and regulations, and essential external financing agreements/covenants, - Include consequences suffered on account of non-compliance or likely to be suffered - Indicate mitigation measures taken or planned to be taken to alleviate the adverse effects of actual or potential consequences of non-compliance V Eastern Africa Regional Transport, Trade and Development Facilitation (EAR TTDP) Project Reports and Financial Statements For the financial year ended June 30, 2018 2. STATEMENT OF PROJECT MANAGEMENT RESPONSIBILITIES The Chief Executive Officer and the Finance Manager for the ICT Authority for EARTTDP project are responsible for the preparation and presentation of the Project's financial statements, which give a true and fair view of the state of affairs of the Project for and as at the end of the financial year ended on June 30, 2018. This responsibility includes: (i) maintaining adequate financial management arrangement and ensuring that these continue to be effective throughout the reporting period; (ii) maintaining proper accounting records, which disclose with reasonable accuracy at any time the financial position of the Project; (iii) designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of the financial statement, and ensuring that they are free from material misstatements, whether due to error or fraud; (iv) safeguarding the assets of the Project; (v) selecting and applying appropriate accounting policies; and (vi) making accounting estimates that are reasonable in the circumstances. The Chief Executive Officer and the Finance Manager for the EARTTDP project accept responsibility for the Projects financial statements, which have been prepared on the Cash Basis Method of financial reporting, using appropriate accounting policies in accordance with International Public Sector Accounting Standards. The Chief Executive Officer and the Finance Manager for the EARTTDP project are of the opinion that the Projects Transactions during the financial year ended June 30, 2018, and of the Projects financial position as at that date. The Chief Executive Officer and the Finance Manager for the EARTTDP project confirm the completeness of the accounting' records maintained for the Project, which have been relied upon in the preparation of the Project financial statements as well as the adequacy of the systems of internal financial control. The Chief Executive Officer and the Finance Manager for the EARTTDP project confirm that the Project has complied fully with applicable Government Regulations and the terms of external financing covenants, and that project funds received during the financial year under audit were used for eligible purposes for which they were intended and were properly accounted for. Approval of the Project financial statements The Project financial statements were approved by the Chief Executive Officer and the Finance Manager for the ICT Authority and signed by them for EARTTDP project in September 2018 and signed by them. Ag. Chief Executive Officer Finance Manager vi REPUBLIC OF KENYA Telephone: -254-20-342330 Fax: +254-20-311482 E-mail oag@oagkenya.go,ke P.. O 4 Website www.kenogo_ke OFFICE OFTHE AUDITOR-GENERAL REPOR OF :THE AUI'TR ENIEA ON EASTERN AFRICA~ REGIONAL:'- TRANSORT,1 TRADE AND. 'EVEOPMENT FAILITATION, PROJECT CREDltNO., 568;KEFOR~ THE YEAR ENOtbo 0 JUNJE 2018 -INFORMATION ANDJ COMMUNCATIO'N'S TECHNO~LOGY AUTHORITY RE RT ON THE FINANCIAL STATE NTS Opin,il 'Ih'6, audijted teacpnyig giona a edaccompn in 'fnacal saemerits of Easterni Africa 'RegI T ra T§ p- ort Trdean Deelpmet ad''ltaion Pojet et utonpages I to 10, whic~h comr,ib te sateentof finncil ssets an~d o iabilities as at~ 30 J6ne. 2018, andAhea camerisn of rebeipts and payments -statement of cash flows and statement of comrnison of budget anid.a6tual amounts forthe year then en'ded, and a summary of signi ant accounting policies and other explanatory information in accordance with the provs s of Article 229 of the Constitution of Kenya and Section 35 of the Public Audit Act, 2Q1 50 and the Financing Agreemen,ts'Credit No 5638-KE dated 20 July 2015 between the Infternational Development Association (IDA)ahd the Republic of Kenya. I have obtain6d all the information and explanations which, to the best of my knowledge and belief , re necessary for the prpose ef the audit. In my opinion, the financial statements present fairly, in all material respects, the financial position of Eastern Africa Regional Transport, Trade and Development Facilitation Project as at 30 June, 2018, and of its financial performance and its cash flows for the year then ended, in accordance with international Public Sector Accounting Stan dards,(Cash Basis) and comply with the Financing Agreement Credit No 5638-KE dated 20 July 2015 between Intern'ationfal Development Association and Republic of Kenya. In addition, the Special Account Statement presents fairly, the Special account transactions, and the ending balance has been reconciled with. the books of account. The audit was conducted in accordance with International Standards of Supreme Audit Institutions (ISSAls). I am independent of Eastern Africa Regional Transport, Trade and Development Facilitation Project in accordance with ISSAI 30 on Code of Ethics. I have fulfilled other ethical responsibilities in accordance with the ISSAI and in accordance with other ethical requirements applicable to performing audits of financial statements in Kenya. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion. Report of the Attditoi-Gene'r(l on the Financial Statements of Eastern Afi-ica Regional Trans%port, Trade and Development Facilitation Project Credit No 5638-KE Jbr- the Year Ended 30) June 201Sk - Information and Commnunications Techntologv Anthority PivniJotiizg,,Ictotint(hilit-i in thec Public Svctur Key Audit Matters Key audit matters are those matters that, in my professional judgment, are of most significance in the audit of the financial statements. There were no key Audit Matters to report in the year under review. Other Matters 1. Annual work Plan and Budget The Annual Work Plan and Budget was not submnitted to Donor for approval on 1' May each fiscal ear before implementation as Iiequired by the Donor- (International DevelopmentAssociation-IDA) Finance Agreemhent-Schedule 2 F which states that Annual Work Plan and budget be submitted to Donor f6r approval on 1st May each fiscal year before implementation. The project was therefore operating on an unapproved budget thus in breach of the Financing agreement. 2. Unrealistic Budget A comparison of the budget and actual amounts statement confirmed that the budget was very unrealistic especially on project salaries and purchase of goods and services where the unutilized budget were 63% and 83% respectively. No plausible explanations have been provided for this anomaly. 3. Delayed Project Implementation The project was started in November 2015 with an estimated completion date of December 2021. As at the time of audit the project was 50% to completion time wise. The total estimated budget/funding for the project amounts to SDR 18,500,000 (USD 29,500,000) and equivalent Kshs.2,979,795,000 (at the exchange rate of 1USD to Kshs.101.01). The accumulated expenditure up to 30 June 2018 amounts to Kshs.58,405,735 which translates to approximately 1.7% of the estimated budget of the entire project. Expenditure level casts doubt on absorption of the project funds within the project period. In view of the foregoing, the project might not achieve its objective within the stipulated time. REPORT ON LAWFULNESS AND EFFECTIVENESS IN USE OF PUBLIC RESOURCES Conclusion As required by Article 229(6) of the Constitution, based on the procedures performed, I confirm that, nothing has come to my attention to cause me to believe that public resources have not been applied lawfully and in an effective way. Report of the Auditor-General on the Financial Statements Of Eastern fiica Regional Transport, Trade and Development Facilitation Project Credit Abo 5638-KE *for the Year Ended 30 .June 2018 - Information and Communications Technology Authority 2 The audit was conducted in accordance with ISSAI 4000. The standard requires that I comply with ethical requirements and plan and perform the review so as to obtain assurance about whether the activities, financial transactions and information reflected in the financial statements are in compliance, in all material respects, with the authorities that govern them. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my conclusion. REPORT ON EFFECTIVENESS OF INTERNAL CONTROLS, RISK MANAGEMENT AND GOVERNANCE Conclusion As required by Section 7 (1) (a) of the Public Audit Act, 2015, based on the audit procedures performed, except for the matter(s) described in the Basis for Conclusion on Effectiveness of Internal Controls, Risk Management and Governance section of my report, I confirm that, nothing else has come to my attention to cause me to believe that internal controls, risk management and governance were not effective. Basis for Conclusion Lack of Segregation of Duties An examination of the Internal Control System of the Project revealed an inadequacy in the internal control function. Instances, were noted where a consultant is paid on the production of aeliverables documents stipulating his accomplishments in his design work. The person charged with the responsibility of inspection and approval of the design is the project manager, who also approves for the payment. This is contrary to the requirement of segregation of duties as an internal check. The project finances are prone to risk of misappropriation or even fraud. The audit was conducted in accordance with ISSAI 1315 and ISSAI 1330. The standards require that I plan and perform the audits to obtain assurance about whether effective processes and systems of internal control, risk management and governance were operating effectively, in all material respects. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my conclusion. Responsibilities of Management and Those Charged with Governance Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Public Sector Accounting Standards (Cash Basis) and for maintaining effective internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error and for its assessment of the effectiveness of internal control, risk management and governance. Report Of the Aludifor-General! on tlhe Financial/ Sta,temnts, of Eae-,rn c Reg'ional Tanport 7'ade and Development Faciitation, Prn?cea Credit No 5638-KE fin- tie Year Fided 30 Junie 10/8 - hifiwination, aund CJom iii,cationst Techniovut ihoritY 3 In preparing the financial statements, management is responsible for assessing the Project's ability to continue as a going concern! sustain services, disclosing, as applicable, matters related to sustainability of services and using the applicable basis of accounting unless the management either intends to liquidate or cease operations of the Project, or have no realistic alternative but to do so. Management is also responsible for the submission of the financial statements to the Auditor-General in accordance with the provisions of Section 47 of the Public Audit Act, 2015. In addition to the responsibility for the preparation and presentation of the financial statements described above, management is also responsible for ensuring that the activities, financial transactions and information reflected in the financial statements are in compliance with the authorities which govern them, and that public resources are applied in an effective way. Those charged with governance are responsible for overseeing the financial reporting process, reviewing the effectiveness of how the entity monitors compliance with relevant legislative and regulatory requirements, ensuring that effective processes and systems are in place to address key roles and responsibilities in relation to governance and risk management, and ensuring the adequacy and effectiveness of the control environment. Auditor-General's Responsibilities for the Audit of the Financial Statements The audit objectives are to obtain reasonable assurance about whether the financial' statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes my opinion in accordance with the provisions of Section 48 of the Public Audit Act, 2015 and submit the audit report in compliance with Article 229(7) of the Constitution. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISSAIs will always detect a material misstatement and weakness when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. In addition to the audit of the financial statements, a compliance review is planned and performed to express a conclusion with limited assurance as to whether, in all material respects, the activities, financial transactions and information reflected in the financial statements are in compliance with the authorities that govern them in accordance with the provisions of Article 229(6) of the Constitution and submit the audit report in compliance with Article 229(7) of the Constitution. Further, in planning and performing the audit of the financial statements and audit of compliance, I consider internal control in order to give an assurance on the effectiveness of internal controls, risk management and governance processes and systems in accordance with the provisions of Section 7 (1) (a) of the Public Audit Act, 2015 and Report of the Ai(ditor-GeneCrat on the Financial Statem,enits of' East ern Africa Rqgioital Transport. Trade and Development Facilit ation Project Credit A." 5638-KE Jbr the Year Ended 30 Ju,ne 2018 - ilbrIinattionl an Conununications Technology Authority 4 submit the audit report in compliance with Article 229(7) of the Constitution. My consideration of the internal control would not necessarily disclose all matters in the internal control that might be material weaknesses under the ISSAls. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Because of its inherent limitations, internal control may not prevent or detect misstatements and instances of non-compliance. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate. As part of an audit conducted in accordance with ISSAs, I exercise professional judgement and maintain professional skepticism throughout the audit. I also: " Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the management. * Conclude on the appropriateness of the management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Ministry's ability to continue as a going concern or to sustain its services. If I conclude that a material uncertainty exists, I am required to draw attention in the auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify my opinion. My conclusions are based on the audit evidence obtained up to the date of my audit report. However, future events or conditions may cause the Ministry's to cease to continue as a going concern or to sustain its services. d Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation t " Obtain sufficient appropriate audit evidence regarding the financial information and business activities of the Ministry's to express an opinion on the financial statements. * Perform such other procedures as I consider necessary in the circumstances. Report of the Aitditor-Getteral on t3 Financial tateents o f Eastern Africa Regional Transport. Trade and Deelopme t Fciitaton Prol ct Credit No 5638-KE fi>r tie Year Ended 30 June 2018 - htbrination and C11111i cIt~ioins Technol ogn Authortitv 5 I communicate with the management regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that are identified during the audit. I also provide management with a statement that I have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on my independence, and where applicable, related safeguards. FCPA Edward R. 0. Ouko, CBS AUDITOR-GENERAL Nairobi 28 December 2018 Report of the A l(itor-Gle'(1m on thte Financial Statements of Eastern Afr-ic Regional Transport. Trade and Developmewt FacilitatIion Project Credit Not S638-KE -fir tie Year Ended 3(0 June 2018 - hitbriniatin and Connunications Technology Aitthorit.v 6 Eastern Africa Regional Transport, Trade and Development Facilitation (EARTTDP) Project Reports and Financial Statements For the financial year ended June 30, 2018 4. STATEMENT OF RECEIPTS AND PAYMENTS FOR THE PERIOD ENDED 30TH JUNE 2018 Note 2017/18 2016/17 Cumulative Kshs Kshs Kshs RECEIPTS Transfer from Government entities Proceeds from domestic and foreign grants 8.2 - 76,595,883 76,595,883 Loan from external development partners Miscellaneous receipts Total receipts - 76,595,883 76,595,883 PAYMENTS Consultancy 8.3 28,149,594 3,182,700 31,332,294 Project staff salariet 8.4 9,623,422 - 9,623,422 Purchase of goods and services 8.5 3,154,769 2,153,806 5,308,575 Acquisition of non-financial assets 8.6 - 12,141,444 12,141,444 Other grants and transfers and payments TOTAL PAYMENTS 40,927,785 17,477,950 58,405,735 SURPLUS/DEFICIT FOR THE YEAR (40,927,785) 59,117,933 18,190,148 The accounting policies and explanatory notes to these financial statements are an integral part of the financial statements. Ag. Chief Execaive Officer Finance Manager Date Date Eastern Africa Regional Transport, Trade and Development Facilitation (EARTTDP) Project Reports and Financial Statements For tihe financial year ended June 30, 2018 5. STATEMENT OF FINANCIAL ASSETS AND LIABILITIES AS AT 30TH JUNE 2018 Note 2017/18 2016/17 Kshs Kshs FINANCIAL ASSETS Cash and Cash Equivalents Bank Balances 8.7 18,190,148 59,117,933 Cash Balances Cash Equivalents Imprests and Advances TOTAL FINANCIAL ASSETS 18,190,148 59,117,933 REPRESENTED BY: Cash and cash equivalents b/fwd. 59,117,933 Surplus/Deficit for the year (40,927,785) 59,117,933 Prior year adjustments NET FINANCIAL POSITION . 18,190;148 59,117,933 The accounting policies and explanatory notes to these financial statements form an integral part of the financial statements. The financial statements were approved on 99 / 201% and signed by: Ag. Chief Executive Officer Finance Manager Date Date 2 Eastern Africa Regional Transport, Trade and Development Facilitation (EARTTDP) Project Reports and Financial Statements For tie financial year ended June 30, 2018 6. STATEMENT OF CASHFLOW FOR THE PERIOD 30TH JUNE 2018 2017/18 2016/17 Receipts for operating income Kshs Kshs Transfer from Government entities Proceeds from domestic and foreign grants - 76,595,883 Miscellaneous receipts Payments for operating expenses Consultancy 28,149,594 3,182,700 Project staff salaries 9,623,422 - Purchase of goods and services 3,154,769 2,153,806 Social security benefits Transfers to other government entities Other grants and transfers Other payments-Purchase of Motor Vehicles - 12,141,444 Net cash flow from operating activities 40,927,785 17,477,950 CASHFLOW FROM INVESTING ACTIVITIES Acquisition of Assets . Net cash flows from Investing Activities CASHFLOW FROM BORROWING ACTIVITIES Proceeds from Foreign Borrowings Net cash flow from financing activities . NET INCREASE IN CASH AND CASH EQUIVALENT (40,927,785) 59,117,933 Cash and cash equivalent at BEGINNING of the year 59,117,933 Cash and cash equivalent at END of the year 18,190,148 59,117,933 The accounting policies and explanatory notes to these financial statements form an integral part of the financial statements. The entity financial statements were approved on Q i 9 2018 and signed by: Ag. Chief Executive Officer Finance Manager Date Date 3 Eastern Africa Regional Transport, Trade and Development Facilitation (EARTTDP) Project Reports and Financial Statements For the financial year ended June 30, 2018 7. STATEMENT OF COMPARATIVE BUDGET AND ACTUAL AMOUNTS Actual on Original Supplementary Comparable % Receipts/Payments Item Budget I Final Budget Basis Variance Varfanc a b c= a+b d e=d-c f=e/c Receipts Transfer from Government entities Proceeds from domestic and foreign grants 800,000,000 (600,000,000) 200,000,000 - (200,000,000) -100 Proceeds from borrowings Miscellaneous receipts Total Receipts 800,000,000 (600,000,000) 200,000,000 - (200,000,000) Payments Design and construction of Optic Fibre Cable- rehabilitation Eldoret- Lokichogio- Nadapal, 151,515,800 (75,758,300) 75,757,500 - 75,757,500 100 Design and construction of Optic Fibre Cable- Eldoret- Nadapal/ Nakodok 561,716,610 (521,312,610) 40,404,000 40,404,000 100 Project Communication 1,515,350 - 1,515,350 - 1,515,352 100 ConsuLtancy 28,282,800 - 28,282,800 28,149,594 133,206 0 Project staff salaries 28,181,790 (2,020,200) 26,161,5§0 9,623,422 16, 38,168 63 Purchase of goods and services 19,191,900 (1,010,100) 18,181,800 3,154,769 15,027,031 83' Acquisition of non-financial assets -- 01 Transfers to other government entities- 0 Other grants and transfers . . 0! Other payments 9,595,950 101,010 9,696,960 9,696,960 100 Total Payments 800,000,200 (600,000,200) 200,000,000 40,927,785 159,072,215 Note: The significant budget utilisation/performance differences in the last column are explained in Annex I to these financial statements. Ag. Chief Executive Officer Finance Manager 2~ & j) I I IA t~ Date Date 4 Eastern Africa Regional Transport, Trade and Development Facilitation (EARTTDP) Project Reports and Financial Statements For the financial year ended June 30, 2018 8. NOTES TO THE FINANCIAL STATEMENTS The principal accounting policies adopted in the preparation of these financial statements are set out below: 8.1 Statement of compliance and basis of preparation The financial statements have been prepared in accordance with and comply with International Public Sector Accounting Standards (IPSAS) with particular emphasis on Cash Basis Financial Reporting under the Cash Basis of Accounting. The financial statements comply with and conform to the form of presentation prescribed by the Accounting Standards Board of Kenya. The financial statements are presented in Kenya Shillings, which is the functional and reporting currency of the Project and all values are rounded to the nearest one Shilling. The accounting policies adopted have been consistently applied to all of the years presented. The financial statements have been prepared on the cash basis following the Government's standard chart of accounts. The cash basis of accounting recognises transactions and events only when cash is received or paid out by the Project. i. Recognition of revenue and expenses The Project recognises all revenues from the various sources when the event occurs and the related cash has adtually been received by the Project. In additiori, the Project recognises all expenses when the event occurs and the related cash has actually been paid out by the Project. if. In-kind donations In-kind donations are contributions made to the Project in the form of actual goods and/or services rather than in money or cash terms. These donations may include vehicles, equipment or personnel services. Where the financial value of in-kind donations can be reliably determined, the Project includes such value in the statement of receipts and payments both as revenue and as an expense in equal and opposite amounts; otherwise, the donation is not recorded. iii. Cash and cash equivalents Cash and cash equivalents comprise cash on hand and cash at bank, short-term deposits on call and highly liquid investments with an original maturity of three months or less, which are readily convertible to known amounts of cash and are subject to insignificant risk of changes in value. Bank account balances include amounts held at the Central Bank of Kenya and at various commercial banks at the end of the financial year/period. For the purposes of these financial statements, cash and cash equivalents also include short term cash imprests and advances to authorised public officers and/or institutions which had not been surrendered or accounted for at the end of the financial year/period. 5 Eastern Africa Regional Transport, Trade and Development Facilitation (EAR TTDP) Project Reports and Financial Statements For the financial year ended June 30, 2018 NOTES TO THE FINANCIAL STATEMENTS (Continued)........................................................... iv. Pending bills Pending bills consist of unpaid liabilities at the end of the financial year/period arising from contracted goods or services during the year/period or in past years/periods. As pending bills do not involve the payment of cash in the reporting period, they are simply disclosed as an Annex to the financial statements. When the pending bills are finally settled, such payments are included in the statement of receipts and payments in the year in which the payments are made. V. Budget The budget is developed on the same accounting basis (cash basis), the same accounts classification basis, and for the same period as the financial statements. The Project's budget was approved as required by Law and National Treasury Regulations, as well as by the participating development partners, as detailed in the Government of Kenya Budget Printed Estimates for the year. A high-level assessment of the Project's actual performance against the comparable budget for the financial year/period under review has been included in an annex to these financial statements. Vi. Exchange rate differences The accounting records are maintained in the functional currency of the primary economic environment in which the Project operates, Kenya Shillings. Transactions in foreign currencies during the year/period are converted into the functional currency using the exchange rates prevailing at the dates of the transactions. Any foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year- end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statements of receipts and payments. vii. Comparative figures Where necessary comparative figures for the previous financial year/period have been amended or reconfigured to conform to the required changes in financial statement presentation. viii. Subsequent events There have been no events subsequent to the financial year/period end with a significant impact on the financial statements for the year ended June 30, 2017. 6 Eastern Africa Regional Transport, Trade and Development Facilitation (EAR TTDP) Project Reports and Financial Statements For the financial year ended June 30, 2018 NOTES TO THE FINANCIAL STATEMENTS (Continued ................................................................ 8.2 PROCEEDS FROM DOMESTIC AND FOREIGN GRANTS During the 12 months to 30 June 2018 we received grants from donors as detailed in the table below: Naof uDovnor Date Amount Grants Grants Grants Total amount in Kshs received received received received receive in donor in cash as direct d in currency payment kind FY FY 2016/17 2017/18 Grants Received from Bilateral Donors (Freig Governments Grants Received from Multilateral Donors (international Organizations) Grants Received from Local Individuals and organizations ______. Total . . - - - 76,595,88 *. The direct payment grants represent payments for goods and services done directly by the donor on behalf of the project. Projects should ensure that the adequate documents and support document is requested from the donors to support this grant. 8.3 CONSULTANCY 2017/18 2016/17 Cumulative Kshs Kshs Kshs Consultancy 28,149,594 3,182,700 31,332,294 Total 28,149,594 3,182,700 31,332,294 7 Eastern Africa Regional Transport, Trade and Development Facilitation (EARTTDP) Project Reports and Financial Statements For the financial year ended June 30, 2018 NOTES TO THE FINANCIAL STATEMENTS (Continued)................... 8.4 PROJECT SALARIES 2017/18 2016/17 Cumulative Kshs Kshs Kshs Project staff salaries 9,623,422 9,623,422 Social benefit schemes outside government 9 Total 9,623,422 - 9,623,422 8.5 PURCHASE OF GOODS AND SERVICES 2017/18 2016/17 Cumulative Kshs Kshs Kshs Domestic travel and subsistence 24,957 191,800 216,757 Foreign travel and subsistence 468,000 648,004 1,116,004 Training expenses 4 64,900 64,900 Hospitality supplies and services 531,517 - 531,517 Insurance costs 508,511 - 508,511 Other operating expenses 257,516 1,249,102 2,401,895 Routine maintenance-vehicle and other transport Printing; advertising and - inforniation 158,030 . 158,030 supplies a services 1,206,237 310,960 3,154,769 2,153,806 5,308,575 8.6 ACQUISITION OF NON-FINANCIAL ASSETS 2017/18 2016/17 Cumulative Kshs Kshs Kshs Purchase of vehicles E other transport equipment Purchase of office furniture & general - 12,141,444 12,141,444 equipment - 12,141,444 12,141,444 8.7 CASH AND CASH EQUIVALENTS C/FWD 2017/18 2016/17 Bank Accounts Kshs Kshs Local Currency Accounts K K Others Citibank [A/c No 0300085035] 18,190,148 59,117,933 Total bank account balances 18,190,148 59,117,933 8 " а � � а� о� -1 - . 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