World Wide Fund For Nature (Mozambique Country Office) Special Purpose Financial Statements for the year ended 31 December 2018 Project name: Dedicated Grants Mechanism for Local Communities in Mozambique Programme numbers: 40001498 (WWF) WWF Project number: P161241_ TF A6007 WORLD WIDE FUND FOR NATURE MOZAMBIQUE COUNYTRY OFFICE PROJECT NAME: DEDICATED GRANTS MECHANISM FOR LOCAL COMMUNITIES IN MOZAMBIQUE PROGRAMME NO: 40001498 (WWF); Project: P161241_ TF A6007 AUDITED FINANCIAL STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2018 ______________________________________________________________________________________________ CONTENTS Statement of responsibility by the Management 2 Independent auditors report 3 Statement of cash receipts and payments 5 Notes to the financial statements 6 1 STATEMENT OF RESPONSIBILITY BY MANAGEMENT The responsibility for the preparation of financial statements that present fairly the statement of receipts and payments and statement of financial position in accordance with the basis of accounting described in the notes of the financial statements, applied consistently, as well for the adoption of adequate accounting policies, is of the management of WWF Mozambique Country Office on behalf of Mozambique Dedicated Grant Mechanism for local Communities Project. The financial statements have been audited by the independent accounting firm, Deloitte & Touche Moçambique, who were given unrestricted access to all financial records and related data. Management believe that all representations made to the independent auditors during their audit were valid and appropriate. The report of the independent auditors is presented on page 3 and 4. The financial statements for the year ended 31 December 2018 presented on pages 5 to 10 have been prepared in accordance with the basis of accounting described in the notes of the financial statements. They are based on appropriate accounting policies which have been consistently applied, and which are supported by reasonable and prudent judgements and estimates. The going concern basis has been adopted in preparing the financial statements. The management have no reason to believe that Project will not be a going concern in the foreseeable future based on forecasts and available cash resources. The management are also responsible for the Project’s system of internal controls. These are designed to provide reasonable but not absolute assurance as to the reliability of the financial statements and to adequately safeguard, verify and maintain accountability of assets. These controls are monitored throughout the audited organization by management and employees with the necessary segregation of authority and duties. Processes are in place to monitor internal controls, to identify material breakdowns and implement timely corrective action. 2 INDEPENDENT AUDITOR’S REPORT To the Donors of the project DGM and Management of WWF Mozambique Country Office Opinion In our opinion, the accompanying financial statements of the project for the period of 1 January 2018 to 31 December 2018 are prepared, in all material respects, in accordance with the basis of accounting described in the Note 3.1 to the financial statements. We have audited the financial statements of WWF Mozambique Country Office “Dedicated Grant Mechanism for Local Communities (the Project)”, financed by World Bank on pages 5 to 10, which comprise the statement of cash receipts and payments for the period 1 January to 31 December 2018 and the notes to the financial statements, including a summary of significant accounting policies. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Organization in accordance with the ethical requirements that are relevant to our audit of the financial statements in terms of the code of ethics issued by the Order of Accountants and Auditors of Mozambique (“OCAM”), which comply with the Code of Ethics issued by the Ethics Standards Board for Accountants (IESBA), and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Emphasis of Matter – Basis of Accounting We draw attention to Note 2 to the financial statements, which describe the basis of accounting. The financial statements are prepared to assist the project in providing financial statements to the donors, potential investors, banking and funding institutions. As a result, the financial statements may only be suitable for these purposes and not for statutory purposes. Our opinion is not modified in respect of this matter. 3 Responsibilities of the directors for the Financial Statements The directors are responsible for the preparation and fair presentation of the financial statements in accordance with Note 2 to the financial statements, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibilities for the Audit of the Financial Statements Our 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 our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement 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. As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional skepticism throughout the audit. We 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 our 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.  Obtain an understanding of internal control relevant to the audit 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 Organization’s internal control.  Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.  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. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Maputo, 5 July 2019 Certified Auditors n.º 09/SCA/OCAM/2014 Per Aneliya Nikolova Partner Certified Auditor n.º 56/CA/OCAM/2014 4 WORLD WIDE FUND FOR NATURE MOZAMBIQUE COUNTRY OFFICE PROJECT NAME: DEDICATED GRANTS MECHANISM FOR LOCAL COMMUNITIES IN MOZAMBIQUE PROGRAMME NO: 40001498 (WWF); Project: P161241_ TF A6007 STATEMENT OF CASH RECEIPTS AND PAYMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 _____________________________________________________________________________ 2018 Description USD Opening balance - Funds received during the year 4 1 064 675 Total receipts 1 064 675 Expenditures Staff costs 5 149 590 Third party fees 6 9 492 Other grants & agreements 7 4 839 Travel & Subsistence 8 100 523 Communications & fundraising costs 9 48 743 Meeting & Training costs 10 77 724 Office running costs 11 15 223 Field running costs 12 43 831 Capital asset costs 13 4 541 Management costs 14 56 814 Total expenditures 511 320 Surplus for the year 15 553 355 5 WORLD WIDE FUND FOR NATURE MOZAMBIQUE COUNTRY OFFICE PROJECT NAME: DEDICATED GRANTS MECHANISM FOR LOCAL COMMUNITIES IN MOZAMBIQUE PROGRAMME NO: 40001498 (WWF); Project: P161241_ TF A6007 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 _____________________________________________________________________________ 1. Programme Background The Dedicated Grant Mechanism (DGM) is a special global initiative under the Forest Investment Program (FIP). DGM was set up to enhance the capacity of local communities in FIP pilot countries and provide grants that support local community initiatives. The 5-year MozDGM is a stand-alone project that has strong synergies with the "Integrated Forests and Landscape Management Forests and Landscape Management portfolio” financed by the Bank in support of Mozambique’s National Sustainable Development Plan. MozDGM is consistent with FIP objectives and well aligned with the Moz FIP project, complementing its aim to promote sustainable forest management by focusing on the community aspects of forest and land management. MozDGM has been prepared through a participatory process. The government led consultations with local communities and CBOs in the south, central and northern regions of Mozambique with 546 participants, 28% of whom were women. These consultations led to the appointment of community representatives to the DGM National Steering Committee (NSC) . Members of academia, civil society, the government and the World Bank were selected to the NSC but only have an advisory role. The NSC has subsequently held three meetings that guided the preparation of the MozDGM, the process of identifying the National Executing Agency (NEA) and initiated the establishment of internal governance mechanisms for the NSC, including electing the members and presidency, taking into account gender balance and the representation of communities. The NSC selected the World Wildlife Fund Mozambique (WWF Mozambique) as the NEA and tasked with MozDGM implementation. 2. Basis of preparation The financial statement have been prepared on modified cash basis of accounting, which is a comprehensive basis of accounting other than generally accepted accounting principles. Under cash basis, income is recognized when received rather than earned, and expenses are recognized when paid rather than when incurred. The financial statement are prepared to assist Dedicated Grant Mechanism For local Communities Project to comply with the provisions of the primary donor contract and subsequent amendments between WWF Mozambique Office and the primary donors. As a result, the financial statements may not be suitable for any other purpose. 3. Summary of Significant Accounting Policies 3.1 Accounting convention The financial statements have been prepared under the historical cost convention. 3.2 Income Recognition Funds received from donors are recognized in the project statements of income and expenditure in the period they were received. 3.3 Expenditure All expenditures are recorded on an accrual basis i.e when goods are received or services are performed, regardless of the actual timing of the payment Contractual commitments for goods to be supplied or services to be rendered in a future financial year are not accrued Actual costs are shown in the line in which they are budgeted. 6 WORLD WIDE FUND FOR NATURE MOZAMBIQUE COUNTRY OFFICE PROJECT NAME: DEDICATED GRANTS MECHANISM FOR LOCAL COMMUNITIES IN MOZAMBIQUE PROGRAMME NO: 40001498 (WWF); Project: P161241_ TF A6007 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018 _____________________________________________________________________________ 3.4 Property, vehicles and equipment Property, vehicles and equipment purchased are expensed in full in the year of acquisition. Donated property, vehicles and equipment are not accounted for in the statement of income and expenditure but are recorded and controlled in a property, vehicles and equipment register. 3.5 Foreign currency translations The functional currency of the project is the United States Dollar (USD). Translations in foreign currency are converted at the exchange rates applicable at the time of the transaction. Assets and liabilities in foreign currency are translated at the rates applicable at the statement of financial position date. The exchange differences arising are dealt with in the statement of income and expenditure. 3.6 Unrestricted Funds Unrestricted funds are contributions that are not subject to externally imposed restrictions on project activities or spending. All income is considered available for unrestricted use specifically restricted by the Donor. 3.7 Restricted Funds Funds that may not be spent freely without authorization by the Donor is considered restricted fund. When a project has received both restricted and unrestricted funds, spending is carried out in order of restriction, starting with the most restricted and ending with the least restricted. This is taken in context of any Donor stipulations which always takes precedent. 3.8 Reporting Period The financial statements have been prepared for twelve months (12) from 1 January 2018 to 31 December 2018 for the purpose of financial reporting to the Primary donors throughout WWF network. 4. Grands Received 2018 Description USD Transfer, April 2018 315 619 Transfer, December 2018 749 056 1 064 6 75 7 WORLD WIDE FUND FOR NATURE MOZAMBIQUE COUNTRY OFFICE PROJECT NAME: DEDICATED GRANTS MECHANISM FOR LOCAL COMMUNITIES IN MOZAMBIQUE PROGRAMME NO: 40001498 (WWF); Project: P161241_ TF A6007 STATEMENT OF INCOME AND EXPENDITURE FOR THE YEAR ENDED 31 DECEMBER 2018 AMOUNTS EXPRESSED IN USD 2018 5. Staff Costs Gross salaries & Statutory Benefits 130 677 Direct cost recovery 18 869 Other staff costs 44 149 590 6. Third party fees Audit fees 4 500 Professional fees 4 992 9 492 7. Other Grant & agreement Network for environment and sustainable community development 4 478 Others 361 4 839 8. Travel & Subsistence Local travel and subsistence 100 376 Other travel & subsistence cost(carbon Offset) 147 100 523 9. Communication & Fundraising Cost Translation services 737 Communications material 36 953 Video and photography production 6 681 Advertising 1 333 Other communications actions 3 039 48 743 8 WORLD WIDE FUND FOR NATURE MOZAMBIQUE COUNTRY OFFICE PROJECT NAME: DEDICATED GRANTS MECHANISM FOR LOCAL COMMUNITIES IN MOZAMBIQUE PROGRAMME NO: 40001498 (WWF); Project: P161241_ TF A6007 STATEMENT OF INCOME AND EXPENDITURE FOR THE YEAR ENDED 31 DECEMBER 2018 AMOUNTS EXPRESSED IN USD 2018 10. Meeting & Training costs + Discretionary/Contingency Accommodation expenses 40 455 Meeting and training costs 20 842 Perdiem, transport, conference room and lunch 13 692 Other meeting and training costs 2 735 77 724 11. Office running costs Office rent 1 862 Cleaning & security 2 648 Office utilities & insurance 623 Communications 1 062 Stationary & office supplies 448 Common cost recovery 6 129 Courier & freight 804 Bank charges 1 647 15 223 12. Field running costs Car rental 24 348 Fuel & maintenance costs 6 926 Purchase of computer for local office 12 510 Vehicle taxis 47 43 831 13. Capital asset costs Purchase of computers national office 3 407 Other costs(internet system) 1 134 4 541 9 WORLD WIDE FUND FOR NATURE MOZAMBIQUE COUNTRY OFFICE PROJECT NAME: DEDICATED GRANTS MECHANISM FOR LOCAL COMMUNITIES IN MOZAMBIQUE PROGRAMME NO: 40001498 (WWF); Project: P161241_ TF A6007 STATEMENT OF INCOME AND EXPENDITURE FOR THE YEAR ENDED 31 DECEMBER 2018 AMOUNTS EXPRESSED IN USD 2018 14. Management costs (12.5%) Management fees (12.5%) 56 814 56 814 15. Surplus for the year Bank 756 345 Payables (Note I) (202 990) 553 355 Note I The payables balance amounting 202 990 USD represent expenses in Meticais paid on behalf of MOZDGM project by other WWF Mozambique non-dedicated accounts. Up to 31/12/2018 the amount was not refunded. 16. Events after the reporting period There have been no major changes in the affairs of the project since the end of the period under review. ______________________ 10